Mesa Company’s fixed budget for the first quarter of calendar year 2011 reveals the following.

Prepare flexible budgets that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 7,500, 10,000, and 12,500 units. (Round your “Variable amount per unit” to 2 decimal places. Input all amounts as positive values. Omit the “$” sign in your response.)

MESA COMPANY
Flexible Budgets
For Quarter Ended March 31, 2011

Flexible Budget

Daytec Company’s fixed budget performance report for June follows. The $440,000 budgeted expenses include $300,000 variable expenses and $140,000 fixed expenses. Actual expenses include $130,000 fixed expenses.

Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately. (Input all amounts as a positive value. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

DAYTEC COMPANY
Flexible Budget Performance Report
For Month Ended June 30

Flexible Budget

Actual Results

Variances

  Sales

$ [removed]  

$ [removed]  

$ [removed]  

  F

  Variable expenses

[removed]  

[removed]  

[removed]  

  U

  Contribution margin

[removed]  

[removed]  

[removed]  

  F

  Fixed expenses

[removed]  

[removed]  

[removed]  

  F

  Income from operations

$ [removed]  

$ [removed]  

$ [removed]  

  F

Sonic Company set the following standard costs for one unit of its product for 2011.

  Direct material (20 Ibs. @ $2.50 per Ib.)

$

  Direct labor (15 hrs. @ $8.00 per hr.)

  Factory variable overhead (15 hrs. @ $2.50 per hr.)

  Factory fixed overhead (15 hrs. @ $0.50 per hr.)

  Standard cost

$

The $3.00 ($2.50 + $0.50) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory’s capacity of 50,000 units per month. The following monthly flexible budget information is also available.

During the current month, the company operated at 70% of capacity, employees worked 500,000 hours, and the following actual overhead costs were incurred.

  Variable overhead costs

$

  Fixed overhead costs

  Total overhead costs

$

1.

Compute variable overhead spending and efficiency variances. (Input all amounts as a positive value. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

  Spending variances

$ [removed]

  U

  Efficiency variances

$ [removed]

  F

2.

Compute Fixed overhead spending and volume variances. (Input all amounts as a positive value. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

  Spending variances

$ [removed]

  U

  Volume variances

$ [removed]

  U

3.

Compute controllable variance. (Input all amounts as a positive value. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

  Controllable variance

$ [removed]

  F

BTS Company made 6,000 bookshelves using 88,000 board feet of wood costing $607,200. The company’s direct materials standards for one bookshelf are 16 board feet of wood at $7 per board foot.

(1)

Compute the direct materials variances incurred in manufacturing these bookshelves. (Do not round your intermediate calculations. Input all amounts as a positive value. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

  Price variance

$ [removed]

   F

  Quantity variance

$ [removed]

   F

  Total materials variance

$ [removed]

   F

Tuna Company set the following standard unit costs for its single product.

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available.

Operating Levels

70%

80%

90%

  Production in units

42,000    

48,000    

54,000    

  Standard direct labor hours

252,000    

288,000    

324,000    

  Budgeted overhead

      Fixed factory overhead

$

2,016,000    

$

2,016,000    

$

2,016,000    

      Variable factory overhead

$

1,260,000    

$

1,440,000    

$

1,620,000    

During the current quarter, the company operated at 70% of capacity and produced 42,000 units of product; actual direct labor totaled 250,000 hours. Units produced were assigned the following standard costs:

Actual costs incurred during the current quarter follow:

Required:

1.

Compute the direct materials cost variance, including its price and quantity variances. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

2.

Compute the direct labor variance, including its rate and efficiency variances. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

3.

Compute the overhead controllable and volume variances. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

  Controllable variance

$ [removed]  

  Fixed overhead volume variance

$ [removed]  

Pebco Company’s 2011 master budget included the following fixed budget report. It is based on an expected production and sales volume of 20,000 units.

PEBCO COMPANY
Fixed Budget Report
For Year Ended December 31, 2011

1.

Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate. (Round your variable amount answers to 2 decimal places. Omit the “$” sign in your response.)

2.

Prepare flexible budgets for the company at sales volumes of 18,000 and 24,000 units. (Round your variable amount per unit answers to 2 decimal places. Input all amounts as positive values. Omit the “$” sign in your response.)

PEBCO COMPANY

Flexible Budgets

For Year Ended December 31, 2011

3.

The company’s business conditions are improving. One possible result is a sales volume of approximately 28,000 units. The company president is confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the 2011 budgeted amount of $125,000 if this level is reached without increasing capacity? (Do not round intermediate calculations.Omit the “$” sign in your response.)

  Operating income increase

$ [removed]  

4.

An unfavorable change in business is remotely possible; in this case, production and sales volume for 2011 could fall to 14,000 units. How much income (or loss) from operations would occur if sales volume falls to this level? (Input the amount as positive value. Do not round intermediate calculations.Omit the “$” sign in your response.)

  Potential operating loss

$ [removed]