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Prepare a flexible budget performance report( calculate the flexible budget amount for 7000 units)

2.  As the company owner, which employees would you praise or criticize after you analyze the performance report?

End of Chapter: Flexible Budgets and Standard Cost Systems
Sutherland Company manufactures book bags and has provided the
following information for June 2024:
Actual Results Static Budget
Units
Sales Revenue
Variable Expenses
Contribution Margin
Fixed Expenses
Operating Income
7,000
$ 87,500
57,400
30,100
19,000
$ 11,100
8,000
$ 96,000
64,000
32,000
20,000
$ 12,000
Requirements
19
Operating Income
$ 11,100
$ 12,000
Requirements
1. Prepare a flexible budget performance report using Exhibit M:8-5
as a guide. (Hint: You will need to calculate the flexible budget
amounts for 7,000 units.) (See Learning Objective 1)
2. As the company owner, which employees would you praise or
criticize after you analyze this performance report? (See Learning
Objective 1)
Solution
Requirement 1
5
SUTHERLAND COMPANY
Flexible Budget Performance Report
For the Month Ended June 30, 2024
1
2
3
(1)-(3)
Budget
Flexible
Amounts Actual Budget Flexible
per Unit Results Variance Budget
Units
7,000
7,000
Sales Revenue $ 12.00 $ 87,500 $3,500 F $ 84,000
Variable Costs
8.00 57,400 1,400 U 56,000
Contribution Margin
30,100
28,000
Fixed Costs
19,000
20,000
Operating Income
$ 11,100 $ 3,100 F $ 8,000
4
(3) -(5)
Sales
Volume
Variance
Static
Budget
8,000
$ 96,000
64,000
$12,000 V
8,000 F
4,000 U
2,100 F
1,000 F
0
32,000
20,000
$ 12,000
$ 4,000 U
Flexible Budget Variance
$ 3,100 F
Sales Volume Variance
$ 4,000 U
Static Budget Variance
$900 U
.
35
E
End of Chapter: Flexible Budgets and Standard Cost Systems
Requirement 2
More information is needed to determine which employees to praise or
criticize. As the company owner, you should determine the causes of the
variances before praising or criticizing employees. It is especially important to
determine whether the variance is due to factors the manager can control. For
example:
.
The $1,000 favorable flexible budget variance for fixed costs could be due
to a reduction in insurance premiums. Or the savings might have come
from delaying a scheduled overhaul of equipment that decreased fixed
expenses in the short term but could increase the company’s costs in the
long run.
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End of Chapter: Flexible Budgets and Standard Cost Systems
The $1,000 favorable flexible budget variance for fixed costs could be due
to a reduction in insurance premiums. Or the savings might have come
from delaying a scheduled overhaul of equipment that decreased fixed
expenses in the short term but could increase the company’s costs in the
long run
The $4,000 unfavorable sales volume variance for operating income
could be due to an ineffective sales staff, or it could be due to a natural
disaster that made it difficult for employees to get to work, bringing
work to a standstill.
.
Wise managers use variances to raise questions and direct attention, not to fix
blame.
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JR
3. What is the direct labor efficiency variance and how would a company
calculate this variance?
4. Suppose that Kellogg Company found an unfavorable total direct labor
variance that was due completely to the direct labor cost variance. What
measures could Kellogg Company take to control this variance?
5. Suppose that Kellogg Company found an unfavorable total direct labor
variance that was due completely to the direct labor efficiency variance. What
measures could Kellogg Company take to control this variance?
End of Chapter: Flexible Budgets a…
JR
Requirements
1. Suppose Kellogg Company noticed an increase in its actual direct labor costs
compared to the budgeted amount. How could Kellogg Company investigate
this?
2. What is the direct labor cost variance and how would a company calculate
this variance?
3. What is the direct labor efficiency variance and how would a company
calculate this variance?
4. Suppose that Kellogg Company found an unfavorable total direct labor
variance that was due completely to the direct labor cost variance. What
measures could Kellogg Company take to control this variance?
< Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. measures could Kellogg Company take to control this variance2 45°F Sunny dx 11:00 AM 124162021 End of Chapter: Flexible Budgets a... ♡ JR VUMUI. Kellogg Company manufactures and markets ready-to-eat cereal and convenience foods including Raisin Bran, Pop Tarts, Rice Krispies Treats, and Pringles. In addition to the raw materials used when producing its products, Kellogg Company also has significant labor costs associated with the products. As of December 29, 2018, Kellogg Company had approximately 34,000 employees. A shortage in the labor pool, regulatory measures, and other pressures could increase the company's labor cost, having a negative impact on the company's operating income. Requirements 1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this? < >
What is the direct labor cost variance and how would a company calculate

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