Posted: July 19th, 2016

# Subdivide each variance into a sales-activity variance portion and a flexible budget variance portion?

Flexible budget preparation:
Tik-a-Lock, Inc., manufactures travel locks. The budgeted selling price is \$18 per lock, the variable cost is \$12 per lock, and budgeted fixed costs are \$12,000.

1. Prepare a flexible budget for output levels of 6,000 locks and 9,000 locks for the month ended April 30, 2011.

8-B3
You have been asked to prepare an analysis of the overhead costs in the order processing department of a mail-order company like Harriet Carter Corporation. As an initial step, you prepare a summary of some events that bear on overhead for the most recent period. Variable overhead is applied based on hours of processing-clerk labor. The standard variable-overhead rate per order was \$.06. The rate of 10 orders per hour is regarded as standard productivity per clerk. The total overhead incurred was \$203,600, of which \$135,900 was fixed. The fixed-overhead spending variance was \$400 unfavorable. The variable-overhead flexible-budget variance was \$5,600 unfavorable. The variable-overhead spending variance was \$3,000 favorable. Find the following:
2. Actual hours of input
3. Standard hours of input allowed for output achieved

8-35
Beta Gamma Sigma, the business honor society, recently held a dinner dance. The original (static) budget and actual results were as follows:
Static Budget ACtual Variance
Attendees 75 90
Revenue \$2625 \$3255 \$630F
Chicken dinners at \$19 1425 1767 342U
Beverages, \$6 per person 450 466 16U
Club rental, \$75 plus 8% tax 81 81 0
Music, 3 hours at \$250 per hour 750 875 125U
Profit (81) 66 \$147F
1. Subdivide each variance into a sales-activity variance portion and a flexible budget variance portion.
2. Provide possible explanations for the variances.