1. The following information pertains to the operating budget for Opa Locka Stuff Corporation.
Sales for August were $175,000
Sales for September were $185,000
Budgeted sales for October is $182,000 and for November is $226,000.
Cash sales are 10% of total sales
Collections for sales on account are 50% in the month of sale, 40% the next month, 8% in the third month.
Gross margin is 40% of sales.
Purchases are paid 30% in the month of purchase and 70% in the next month. Merchandise is bought and sold in the same month. There is no beginning or ending inventory.
Operating, general & administrative costs are $62,000 each month, $4,000 of which is depreciation expense.
A downpayment on new equipment for January delivery is due on October 5th in the amount of $14,000.
Opa Locka policy is to end each month with $20,000 cash on hand.
Beginning cash balance on October 1 is $20,000.
The outstanding loan balance on October 1 is $30,000.
What are . . .
Collections from sales for October _____________ November _____________
Disbursements for purchases October _____________ November _____________
Cash balance at the end of (before borrowing/repaying) October _____________ November _____________
Loan balance at the end of October _____________ November _____________
Operating income for October _____________ November _____________
Cash flow for October _____________ November _____________
Uncollected balance from sales at the end of November _____________
Unpaid balance from purchases at the end of November _____________
2. Cutler Ridge Company prepared the following performance report for September. Cutler Ridge would like you to prepare the flexible budget and help them understand the results of operations.
Actual Master
Results Budget
Sales volume (in units) 60,000 56,000
Manufacturing costs:
Direct materials $285,000 $252,000
Direct labor $94,000 $89,600
Variable overhead 120,000 126,000
Fixed manufacturing suppot 310,000 299,600
Total $ 809,000 $ 767,200
Required:
Prepare the flexible budget for Cutler Ridge based on the information provided above. Calculate the flexible budget variances for each cost item as well as the total variance. Indicate whether the variances are favorable or unfavorable.
Which variances require the attention of management? Explain.
3. Miami Gardens Manufacturing Corp. makes a specialty product and has developed the following standard costing information:
Direct materials 2 lbs $ 8.50 per lb.
Direct labor 1.5 hrs $11.00 per hour
Variable support rate $28.50 per direct labor hour
Actual production for September used the following resources:
Units manufactured 3,000
Direct materials used in production 6,125 lbs $ 51,756.25
Direct labor 4,435 hrs $ 49,893.75
Actual variable support $128,526.30
Calculate the following variances:
Direct material price variance
Direct material quantity variance
Total direct material variance
Direct labor rate variance
Direct labor efficiency variance
Total direct labor variance
Variable support rate variance
Variable support efficiency variance
Total variable support variance
