Agent Blaze uses flexible budgets that are based on the following data:

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Flexible Budget for Selling and Administrative Expenses

Agent Blaze uses flexible budgets that are based on the following data:

Sales commissions8% of sales
Advertising expense21% of sales
Miscellaneous selling expense$1,800 plus 4% of sales
Office salaries expense$12,000 per month
Office supplies expense5% of sales
Miscellaneous administrative expense$1,300 per month plus 3% of sales

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Prepare a flexible selling and administrative expenses budget for January 2014, for sales volumes of $80,000, $100,000, and $120,000. (Use Exhibit 5 as a model.) Enter all amounts as positive numbers.



Agent Blaze
Flexible Selling and Administrative Expenses Budget
For the Month Ending January 31, 2014
Total sales
 
$80,000
 
$100,000
 
$120,000
Variable cost:
      
Sales commissions
 
$ [removed]
 
$ [removed]
 
$ [removed]
Advertising expense
 
[removed]
 
[removed]
 
[removed]
Miscellaneous selling expense
 
[removed]
 
[removed]
 
[removed]
Office supplies expense
 
[removed]
 
[removed]
 
[removed]
Miscellaneous administrative expense
 
[removed]
 
[removed]
 
[removed]
Total variable cost
 
$ [removed]
 
$ [removed]
 
$ [removed]
Fixed cost:
      
Miscellaneous selling expense
 
$ [removed]
 
$ [removed]
 
$ [removed]
Office salaries expense
 
[removed]
 
[removed]
 
[removed]
Miscellaneous administrative expense
 
[removed]
 
[removed]
 
[removed]
Total fixed cost
 
$ [removed]
 
$ [removed]
 
$ [removed]
Total selling and administrative expenses
 
$ [removed]
 
$ [removed]
 
$ [removed]

 


 
   

 

Static Budget vs. Flexible Budget

The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget for the upcoming year:

Nell Company
Machining Department
Monthly Production Budget
Wages$460,000
Utilities38,000
Depreciation63,000
Total$561,000

The actual amount spent and the actual units produced in the first three months of 2014 in the Machining Department were as follows:

 Amount SpentUnits Produced
January$530,000 124,000 
February508,000 113,000 
March487,000 102,000 

The Machining Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget. However, the plant manager believes that the budget should not remain fixed for every month but should "flex" or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

Wages per hour$17.00
Utility cost per direct labor hour$1.40
Direct labor hours per unit0.20
Planned monthly unit production136,000


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a.  Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.



Nell Company-Machining Department
Flexible Production Budget
For the Three Months Ending March 31, 2014
  
January
 
February
 
March
Units of production
 
[removed]
 
[removed]
 
[removed]
Wages
 
$ [removed]
 
$ [removed]
 
$ [removed]
Utilities
 
[removed]
 
[removed]
 
[removed]
Depreciation
 
[removed]
 
[removed]
 
[removed]
Total
 
$ [removed]
 
$ [removed]
 
$ [removed]

 

 

b.  Compare the flexible budget with the actual expenditures for the first three months.

 JanuaryFebruaryMarch
Total flexible budget$[removed]$[removed]$[removed]
Actual cost[removed][removed][removed]
Excess of actual cost over budget$[removed]$[removed]$[removed]

What does this comparison suggest?

Flexible Budget for Fabrication Department

Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:

The Machining Department has performed better than originally thought.   YES OR NO 
The department is spending more than would be expected.      YES OR NO
Steel per filing cabinet48 pounds
Direct labor per filing cabinet30 minutes
Supervisor salaries$147,000 per month
Depreciation$24,000 per month
Direct labor rate$12 per hour
Steel cost$1.53 per pound

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Prepare a flexible budget for 15,000, 19,000, and 23,000 filing cabinets for the month of October 2014, similar to Exhibit 5, assuming that inventories are not significant. Enter all amounts as positive numbers.



Cabinaire Inc-Fabrication Department
Flexible Production Budget
October 2014 (assumed data)
Units of production
 
15,000
 
19,000
 
23,000
Variable cost:
      
Direct labor
 
$ [removed]
 
$ [removed]
 
$ [removed]
Direct materials
 
[removed]
 
[removed]
 
[removed]
Total variable cost
 
$ [removed]
 
$ [removed]
 
$ [removed]
Fixed cost:
      
Supervisor salaries
 
$ [removed]
 
$ [removed]
 
$ [removed]
Depreciation
 
[removed]
 
[removed]
 
[removed]
Total fixed cost
 
$ [removed]
 
$ [removed]
 
$ [removed]
Total department cost
 
$ [removed]
 
$ [removed]
 
$ [removed]

 

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