AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015
Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto
Problem 1 Static Budget Variance
Banca Books, Inc., produces luxury checkbooks with three checks and stubs per
page. Each checkbook is designed for an individual customer and is ordered
through the customers bank. The companys operating budget for September
2014 included these data:
Number
of
Checkbooks
Selling price per
book
Variable cost per
book
Fixed costs for the
month
15
,000
Number
of
produced and sold
checkbooks
12,0
00
$
20
$
Average selling price per book
21
$
8
$
Variable cost per book
$
145,000
$
Fixed costs for the month
150,000
The executive vice president of the company observed that the operating income
for September was much lower than anticipated, despite a higher-than-budgeted
selling price and a lower-than-budgeted variable cost per unit. As the companys
management accountant, you have been asked to provide explanations for the
disappointing September results.
Banca Books, Inc., develops its flexible budget on the basis of budgeted peroutput-unit revenue and per-output-unit variable costs without detailed analysis
of budgeted inputs.
Bank Management develops its flexible budget on the basis of budgeted peroutput-unit revenue and per-output-unit variable costs without detailed analysis
of budgeted inputs.
1. Prepare a static-budget-based variance analysis of the September
performance.
2. Prepare a flexible-budget-based variance analysis of the September
performance.
3. Why might Bank Management find the flexible-budget-based variance
analysis more informative than the static-budget-based variance analysis?
Explain your answer.
Problem 2- Flexible Budget Breakdowns
PT Alam Sejahtera is a manufacturing company in the snack industry. Earlier in
2013, the management decided to introduce a new product called Kacang
Premium, an assortment of nuts in a pack, and it will be manufactured in the
Karawang Barat Plant. As its name suggests, Kacang Premium uses only the best
ingredients and is seasoned with a secret ingredient. Kacang Premium will be
sold in packs of 150 grams, and made in batches. The Product Development
Manager has proposed that a batch of Kacang Premium (consisting of 200 packs)
consists of ingredients as below:
AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015
Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto
Ingredient
Quantity per Batch
Price of input
Pistachio
100 boxes
Rp 50.000 per box
Walnut
80 boxes
Rp 35.000 per box
Macadamia
120 boxes
Rp 25.000 per box
Secret Seasoning
20 boxes
Rp 70.000 per box
During the second quarter of 2013, the Production Manager of PT Alam Sejahtera
reported that Karawang Barat Plant has manufactured 150 batches of Kacang
Premium, and it has been distributed in several upscale supermarkets in
Jabodetabek. The quantity of inputs and price of inputs are reported as below.
Ingredients
Actual Quantity
Actual Cost
Actual Mix
Pistachio
16.640 boxes
Rp 856.960.000
32,5%
Walnut
11.520 boxes
Rp 402.048.000
22,5%
Macadamia
19.968 boxes
Rp 539.136.000
39%
Secret Seasoning
3.072 boxes
Rp 192.000.000
6%
Total Actual
51.200 boxes
Rp 1.990.144.000
100%
1. What is the budgeted cost of direct materials for the 30.000 packs?
2. Calculate the total direct materials efficiency variance.
3. Calculate the total direct materials mix and yield variances. What are these
variances telling you about the 30.000 packs produced this quarter? Are the
variances large enough to investigate?
Problem 3 Market Share and Size Variance
AdiWear Company produces dry-fit t-shirt for joggers. Information pertaining to
AdiWears operations for May 2014 follows:
Units sold
Sales revenue
Variable cost ratio
Market size in units
Actual
230550
$
3,412,140
68%
4,350,000
Budget
220000
$
3,300,000
64%
4,400,000
a. Compute the sales volume variance for May 2014
b. Compute the market-share and market-size variances for May 2014
c. Comment on possible reasons for the variance you computed in
requirement b
AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015
Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto
Problem 4 Variable and Fixed Overhead Variance
The Italiano Beread Company bakes baguettes for fistribution to upscale grocery
stores. The company has two direct-cost categories: DM and DML. Variable
manufacturing overhead is allocated to products on the basis of standard DMLhours. Following is osme budget date for the Italiano Bread Company
DM labor use
Variable Manufacturing Overhead
0.02 hours per baguette
10 per DML-hour
The Italiano Bread Company provides the following additional data for the year
ended December 31, 2014:
Planned (budgeted) output
Actual Production
DML
Actual Variable manufacturing Overhead
3,200,000
2,800,000
50,400
680,400
1. What is the denominator level used for allocating variable manufacturing
overhead?
2. Prepare a variances analysis of variable manufacturing overhead
The Italiano Bread Company also allocates fixed manufacturing overhead to
products on the basis of standard DML-hours. For 2014, fixed manufacturing
overhead was budgeted at $4.00 per DML-hours. Actual fixed manufacturing
overhead incurred during the year was $272,000
1. Prepare a variance analysis of fixed manufacturing overhead cost
2. Is fixed overhead underallocated or overallocated?
AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015
Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto
Homework
Boehringer Ingelheim budgeted prices for direct materials, direct manufacturing
labor, and direct marketing (distribution) labor per bottle are $40, $8, and $ 12,
respectively. The president is pleased with the following performance report:
Actual
Costs
Static
Budget
$
Direct Materials
364,000
$
400,000
$
Direct Manufacturing Labor
Direct Marketing (distribution)
labor
78,000
$
36,000
$
800,000
$
110,000
Variance
722,000
$
120,000
F
$
F
$
10,000
Actual output was 8,800 bottle. Assume all three direct-cost items shown are
variable costs. Is the presidents pleasure justified? Prepare a revised
performance report that uses a flexible budget and a static budget.
