Budgets in managerial accounting

Assignment Help Financial Management
Reference no: EM131526

Problem 1

Budgets in Managerial Accounting

Santiago's Salsa is in the process of preparing a production cost budget for May.  Actual costs in April were:

Santiago's Salsa

Production Costs

April 2011

 

                                Production                                                           25,000 Jars of Salsa

                                Ingredient cost(variable)                                     $20,000

                                Labor cost(variable)                                             12,000

                                Rent(fixed)                                                           5,000

                                Depreciation(fixed)                                               6,000

                                Other(fixed)                                                          1,000

                                Total                                                                      $44,000

Required

  1. Using the information, prepare a budget for May.  Consider that production wil increase to 30,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign.
  2. Does the budget suggest that additional workers are needed?  Consider the wage rate is $20 per hour. How many additional labor hours are needed in May?  What could happen if management did not anticipate the need for additional labor in May?
  3. Determine the actual cost per unit in April and the budgeted cost per unit in May. Describe why the cost per unit is expected to decrease.

Problem 2 Budgets in Managerial Accounting  

Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the following budget for 2011.

Sales Department

Budgeted Costs2011

(Assuming Sales of $10,000,000)

                     Salaries(fixed)                                                                                      $400,000

                     Commissions(variable)                                                                         150,000

                     Advertising(fixed)                                                                                  75,000

                     Charge for office space(fixed)                                                               3,000

                     Office Supplies & forms(variable)                                                          2,000

                     Total                                                                                                     $630,000

After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $100,000. Further , she wanted Matthew to assume a sales level of $11,000,000.  This level of sales is to be achieved without adding to the sales force.

Matthew's sales group occupies approximately 250 square feet of office space put of total administrative office space of 20,000 square feet.  The $3,000 space charge in Matthew's budget is his share (allocated based on relative square feet) of the company's total cost of rent, utilities, and janitorial cost for the administrative office building.

Show a revised budget consistent with the president's recommendation.

Problem 3:  Performance Reports  At the end of 2011, Cyril Fedako Products, received a report comparing budgeted and actual production costs for the company's plant in Forest Lake, Minnesota.

Manufacturing Costs

Forest Lake Plant

Budget versus Actual 2011

                                                       Budget                                 Actual                   Difference(Actual Minus Budget)

Materials                                         $3,200,000                     $3,500,000                          $300,000

Direct Labor                                    2,300,000                       2,500,000                             200,000

Supervisory salaries                        475,000                         500,000                                 25,000

Utilities                                            125,000                         135,000                                 10,000

Machine maintence                         350,000                          380,000                                 30,000

Depreciation of building                  90,000                            90,000                                      -0-         

Depreciation of equipment              250,000                         255,000                                   5,000

Janitorial                                          220,000                         235,000                                  15,000

Total                                                $7,010,000                    $7,595,00                                $585,000

His first thought was that costs must be out of control since actual costs exceed the budget by $585,000.  However, he quickly recalled that the budget was set assuming a production level of 60,000 units. The Forest Lake plant actually produced 65,000 units in 2011.

  1. Give that production was greater than planned, could Cyril expect that all actual costs will be greater than budgeted?  Which costs should you expect to increase, and which costs should you expect to remain relatively constant?
  2. Cyril is extremely busy - the company has six other plants.  Thus, he cannot spend time investigating every departure from the budget. With this in mind, which cost(s) could Cyril concentrate on in his investigation of budget differences?

Reference no: EM131526

Questions Cloud

Accounting for extractive industries : Accounting for Extractive Industries Production commences in Site One
Explain interval and arithmetic coding : Evaluate the cumulative distribution function and the binary intervals
Write a c program that reads a data file of floating numbers : Write a program that reads a data file of floating numbers into an array and prints the array elements along with the number of items in the array
Prepare solutions to the construction contracts : Please prepare solutions to the following questions concerning topics covered in the first half of the course
Budgets in managerial accounting : Using the information, prepare a budget for May. Consider that production wil increase to 30,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign.
Prepare the correct journal entries : Prepare the correct journal entries to record the transactions.
What is the amount of your scheduled payments : What is the amount of your scheduled payments?
Analog measurements : Prepare an assembly program for the correctly measures the wind direction
Create a simple shell : Create a simple shell. Basically your shell should read the line from standard input, parse the line with command and arguments, and operate the command with arguments.

Reviews

Write a Review

Financial Management Questions & Answers

  Long-term financing needed

How much new long-term debt financing will be needed.

  Maximization of shareholder wealth

Maximization of shareholder wealth

  Negative growth stock

Questions related to Negative growth stock

  General business issues

Advice for Dealing with Business Problems

  Supply and demand

Question based on supply and demand

  Provide financial planning advice to the clients

Provide financial planning advice in the case study.

  Develop a financial analysis

Develop a financial analysis

  Create a portfolio of analytical reference materials

Create a portfolio of analytical reference materials including the financial reports for at least five years. This is your analytical permanent file for the selected company.

  Financial statement analysis project

Using the financial statements for Kohl's Corporation and J.C. Penney Corporation, respectively, you will calculate and compare the financial ratios

  Report annual cash flows

Briefly explain why you are using the computational method chosen. (Hint: you will need to decide to use the APV or WACC formula.

  Explain the important characteristics of this index

Develop an insight into the pricing of financial instruments

  What is the net present value

What is the Net Present Value (NPV) of the asset if the company's required rate of return on such assets is 10%?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd