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


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