Harold’s Roof Repair has provided the following data concerning its costs:

Harold’s Roof Repair has provided the following data concerning its costs:

Fixed Cost per Month

Cost per Repair-Hour

Wages and salaries	$	21,400		$	15.00
Parts and supplies				$	7.00
Equipment depreciation	$	2,740		$	.30
Truck operating expenses	$	5,780		$	1.50
Rent	$	4,680
Administrative expenses	$	3,820		$	.40

For example, wages and salaries should be $21,400 plus $15.00 per repair-hour. The company expected to work 2,600 repair-hours in June, but actually worked 2,500 repair-hours. The company expects its sales to be $46.00 per repair-hour.

Required:

Compute the company’s activity variances for June. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Harold's Roof Repair Activity Variances For the Month Ended June 30
Revenue	$	U
Expenses:
Wages and salaries		F
Parts and supplies		F
Equipment depreciation		F
Truck operating expenses		F
Rent		None
Administrative expenses		F
Total expense		F
Net operating income	$	U

Explanation:

Harold's Roof Repair Activity Variances For the Month Ended June 30
	Planning Budget		Flexible Budget		Activity Variances
Repair-hours (q)		2,600		2,500
Revenue ($46.00q)	$	119,600	$	115,000	$	4,600	U
Expenses:
Wages and salaries ($21,400 + $15.00q)		60,400		58,900		1,500	F
Parts and supplies ($7.00q)		18,200		17,500		700	F
Equipment depreciation ($2,740 + $.30q)		3,520		3,490		30	F
Truck operating expenses ($5,780 + $1.50q)		9,680		9,530		150	F
Rent ($4,680)		4,680		4,680		0	None
Administrative expenses ($3,820 + $.40q)		4,860		4,820		40	F
Total expense		101,340		98,920		2,420	F
Net operating income	$	18,260	$	16,080	$	2,180	U

The Toque Cooking Academy runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run four courses in a month and have a total of 61 students enrolled in those four courses. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month		Cost per Course	Cost per Student
Instructor wages			$2,920
Classroom supplies				$290
Utilities	$	1,230	$55
Campus rent	$	4,700
Insurance	$	2,400
Administrative expenses	$	3,700	$44	$4

For example, administrative expenses should be $3,700 per month plus $44 per course plus $4 per student. The company’s sales should average $880 per student.

The actual operating results for October appear below:

	Actual
Revenue	$	50,780
Instructor wages	$	10,960
Classroom supplies	$	17,540
Utilities	$	1,860
Campus rent	$	4,700
Insurance	$	2,540
Administrative expenses	$	3,546

Required:
1.	The Toque Cooking Academy expects to run four courses with a total of 61 students in October. Complete the company’s planning budget for this level of activity. (Input all amounts as positive values. Omit the "$" sign in your response.)

Toque Cooking Academy Planning Budget For the Month Ended October 31
Revenue	$
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Total expense
Net operating income	$

2.	The school actually ran four courses with a total of 59 students in October. Complete the company’s flexible budget for this level of activity. (Input all amounts as positive values. Omit the "$" sign in your response.)

Toque Cooking Academy Flexible Budget For the Month Ended October 31
Revenue	$
Expenses:
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
Total expense
Net operating income	$

3.

Complete the flexible budget performance report that shows both activity variances and revenue and spending variances for October. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Toque Cooking Academy Flexible Budget Performance Report For the Month Ended October 31
	Activity Variances		Revenue and Spending Variances
Revenue	$	U	$	U
Expenses:
Instructor wages		None		F
Classroom supplies		F		U
Utilities		None		U
Campus rent		None		None
Insurance		None		U
Administrative expenses		F		F
Total expense		F		F
Net operating income	$	U	$	U

Explanation:

1.

Revenue ($880 × 61) = $53,680

Instructor wages ($2,920 × 4) = $11,680

Classroom supplies ($290 × 61) = $17,690

Utilities ($1,230 + ($55 × 4)) = $1,450

Administrative expenses ($3,700 + ($44 × 4) + ($4 × 61)) = $4,120

2.

Revenue ($880 × 59) = $51,920

Instructor wages ($2,920 × 4) = $11,680

Classroom supplies ($290 × 59) = $17,110

Utilities ($1,230 + ($55 × 4)) = $1,450

Administrative expenses ($3,700 + ($44 × 4) + ($4 × 59)) = $4,112

3.

   

Toque Cooking Academy Flexible Budget Performance Report For the Month Ended October 31
	Planning Budget		Activity Variances			Flexible Budget		Revenue and Spending Variances			Actual Results
Courses (q1)		4					4					4
Students (q2)		61					59					59
Revenue($880q2)	$	53,680	$	1,760	U	$	51,920	$	1,140	U	$	50,780
Expenses:
Instructor wages ($2,920q1)		11,680		0	None		11,680		720	F		10,960
Classroom supplies ($290q2)		17,690		580	F		17,110		430	U		17,540
Utilities ($1,230 + $55q1)		1,450		0	None		1,450		410	U		1,860
Campus rent ($4,700)		4,700		0	None		4,700		0	None		4,700
Insurance ($2,400)		2,400		0	None		2,400		140	U		2,540
Administrative expenses    ($3,700 + $44q1 +$4q2)		4,120		8	F		4,112		566	F		3,546
Total expense		42,040		588	F		41,452		306	F		41,146
Net operating income	$	11,640	$	1,172	U	$	10,468	$	834	U	$	9,634

You have just been hired by SecuriDoor Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for April:

  

	Cost Formula	Actual Cost in April
Utilities	$16,700 plus $.14 per machine-hour	$	21,020
Maintenance	$38,300 plus $1.50 per machine-hour	$	59,100
Supplies	$.40 per machine-hour	$	7,000
Indirect labor	$94,700 plus $1.80 per machine-hour	$	128,000
Depreciation	$68,400	$	70,100

  

During April, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000 machine-hours during April.

  

Required:

1.

Complete a report showing the activity variances for April. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

  

SecuriDoor Corporation Activity Variances For the Month Ended April 30
Utilities	$	F
Maintenance		F
Supplies		F
Indirect labor		F
Depreciation		None
Total	$	F

  

2.

Complete a report showing the spending variances for April. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

  

SecuriDoor Corporation Spending Variances For the Month Ended April 30
Utilities	$	U
Maintenance		F
Supplies		U
Indirect labor		U
Depreciation		U
Total	$	U

Explanation:

1.

The activity variances are shown below:

  

SecuriDoor Corporation Activity Variances For the Month Ended April 30
	Planning Budget		Flexible Budget		Activity Variances
Machine-hours (q)		18,000		16,000
Utilities ($16,700 + $.14q)	$	19,220	$	18,940	$	280	F
Maintenance ($38,300 + $1.50q)		65,300		62,300		3,000	F
Supplies ($.40q)		7,200		6,400		800	F
Indirect labor ($94,700 + $1.80q)		127,100		123,500		3,600	F
Depreciation ($68,400)		68,400		68,400		0	None
Total	$	287,220	$	279,540	$	7,680	F

  

2.

The spending variances are computed below:

  

SecuriDoor Corporation Spending Variances For the Month Ended April 30
	Flexible Budget		Actual Results		Spending Variances
Machine-hours (q)		16,000		16,000
Utilities ($16,700 + $.14q)	$	18,940	$	21,020	$	2,080	U
Maintenance ($38,300 + $1.50q)		62,300		59,100		3,200	F
Supplies ($.40q)		6,400		7,000		600	U
Indirect labor ($94,700 + $1.80q)		123,500		128,000		4,500	U
Depreciation ($68,400)		68,400		70,100		1,700	U
Total	$	279,540	$	285,220	$	5,680	U

The KGV Blood Bank, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The blood bank has just finished its operations for September, which was a particularly busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. As a consequence, the blood bank collected and processed over 20% more blood than had been originally planned for the month.

A report prepared by a government official comparing actual costs to budgeted costs for the blood bank is given below. (The currency on St. Lucia is the East Caribbean dollar.) Continued support from the government depends on the blood bank’s ability to demonstrate control over its costs.

KGV Blood Bank Cost Control Report For the Month Ended September 30
	Planning Budget		Actual Results		Variances
Liters of blood collected		600		780
Medical supplies	$	6,960	$	9,102	$	2,142	U
Lab tests		8,670		10,842		2,172	U
Equipment depreciation		1,300		1,500		200	U
Rent		1,300		1,300		0
Utilities		280		304		24	U
Administration		14,360		14,625		265	U
Total expense	$	32,870	$	37,673	$	4,803	U

The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all of the figures had been submitted by the blood bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget.

The following cost formulas were used to construct the planning budget:

Medical supplies	$11.60q
Lab tests	$14.45q
Equipment depreciation	$1,300
Rent	$1,300
Utilities	$280
Administration	$13,400 + $1.60q

Required:

1.

Complete the performance report for September using the flexible budget approach. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to the nearest whole dollar amount. Omit the "$" sign in your response.)

KGV Blood Bank Flexible Budget Performance Report For the Month Ended September 30
	Activity Variances		Spending Variances
Medical supplies	$	U	$	U
Lab tests		U		F
Equipment depreciation		None		U
Rent		None		None
Utilities		None		U
Administration		U		F
Total expense	$	U	$	F

Explanation:

Performance should be evaluated using a flexible budget performance report. In this case, the report will not include revenues.

KGV Blood Bank
Flexible Budget Performance Report
For the Month Ended September 30
	Planning Budget		Activity Variances			Flexible Budget		Spending Variances			Actual Results
Liters of blood collected (q)		600					780					780
Medical supplies ($11.60q)	$	6,960	$	2,088	U	$	9,048	$	54	U	$	9,102
Lab tests ($14.45q)		8,670		2,601	U		11,271		429	F		10,842
Equipment depreciation ($1,300)		1,300		0	None		1,300		200	U		1,500
Rent ($1,300)		1,300		0	None		1,300		0	None		1,300
Utilities ($280)		280		0	None		280		24	U		304
Administration ($13,400 + $1.60q)		14,360		288	U		14,648		23	F		14,625
Total expense	$	32,870	$	4,977	U	$	37,847	$	174	F	$	37,673