Practice Calculations Formula/Unit Various Levels

Practice Calculations

Formula/Unit

Various Levels of Output

Sales

$90,000

$105,000

$120,000

Variable Costs

Direct Materials

Hand Labor

Fixed Costs

Depreciation

Salaries

For this, calculations are straightforward. For sales and the variable cost components, it is formula * level of output. So Sales would be 6000*15, 7000*15 and 8000*15.

For direct materials, this has to be calculated backwards, so 39,000 / 6000 = 6.5 for the formula. The formula is then applied to the other levels of output: 6.5*7000 and 6.5*8000.

For hand labor, the formula is 4, so this is multiplied by the different levels of output. 4 *6000, 4*7000, 4*8000.

The fixed costs remain the same for all levels of output.

Chapter 8-33.

Each part of this question has a formula. The results are here:

Costs Incurred

Materials

Labor

Actual inputs x actual prices

154,000

77,800

Actual inputs x expected prices

170,000

74,000

Std inputs for actual outputs x expected prices

172,500

71,300

Price Variance

16,000

-3,800

F

U

Quantity Variance

18,500

-6,500

F

U

Flex Budget Variance

34,500

-10,300

F

U

So in this case, the price variance for direct materials is going to be: 170,000 -- 154,000 and the price variance for direct labor will be 74,000 -- 77,800.

The quantity variance for direct material will be 172,500 -- 154,000 and the quantity variance for direct labor is going to be 71,300 -- 77.800.

Any negative number is unfavorable; and positive number if favorable.

The flex budget variance requires adding the price and quantity variance, so that the flex budget variance for direct materials is 16,000 + 18,500 = 34,500 and is therefore favorable. The flex budget variance for direct labor is -3800 -- 6500 = -10,300 and is therefore unfavorable.

8-39. a) the first step is to compute the actual levels. With respect to revenue, the static budget was based on $0.20 in revenue per passenger mile, which implies

300,000 / .2 = 1,500,000 passenger miles flown.

The actual saw a 10% increase in passenger miles flown but an 8% decrease in revenue per passenger mile. The passenger miles would be (1,500,000 * 1.1) = 1,650,000. The revenue per passenger mile would be $0.20 -- (.08*.2) = $0.184

So the actual revenue was (.184)*(1,650,000) = $303,600.

Now we can calculate Flex for Actual Level, the third column. This is based on the flex budget figures, which were $0.20 in revenue per passenger mile. Variable expenses were 195,000 / 1,500, 000 = $0.13 per passenger mile in the flex budget. Fixed costs were $80,000 and that should not change.

The results Flex for Actual Level shows that the actual performance was lower than what would have been expected given the actual sales levels recorded and the figures listed in the static budget. This is to be expected, because the actual revenue per passenger mile was decreased in order to achieve those higher passenger mile figures.

The columns 2 and 4 can now be filled in, according to the formulas presented on page 310. Column 2 = Column 1 -- Column 3; and Column 4 = Column 3 -- Column 5.

The total chart is as follows:

Flex for Sales-Act

Static

Actual

Variances

Actual level

Variance

Budget

Passenger Miles

1650000

0

1650000

150000

1500000

Revenue

303600

-26400

330000

30000

300,000

Variable Exp

200,000

-14500

214500

19500

195,000

Contribution

103,600

-11900

115,500

10500

105,000

Fixed Exp

87,000

80,000

0

80,000

Income

16,600

-18900

35,500

10500

25,000

Note that here the jet fuel cost isn't something to worry about, because it is included in the actual cost figures already provided.