You have just been hired by SecuriDoor Corporation, the manufacturer of a

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