Explain why a company uses static and flexible budgets

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Reference no: EM131821221

Assignment

1. Explain (briefly) the distinction between a cost, profit and investment center in a business, and provide an example.

2. Explain why a company uses static and flexible budgets.

3. Complete the following chart.

Compute variances for the items shown in the following list and indicate whether each variance is favorable (F) or unfavorable (UF).

Item

Budget

Actual

Variance

F or UF

Selling and Administrative Expenses

$ 29,000

$ 27,000

 


Sales Revenue

$310,000

$325,000.

 


Materials Price

$2.00  per lb.

$2.10 per lb.

 


Cost of Goods Sold

$125,000

$100,000

 


Materials Purchases

$250,000.

$265,000 .

 


Materials Usage

6,000 lbs.

5,800 lbs.

 


Sales Price

$550 each

$500 each

 


Labor Rate

$8.10  per hour

$7.95 per hour

 

 

Production Volume

950 units

900 units.

 


Labor Usage

$96,000

$97,000

 


Research and Development Expense

$22,000

$25,000

 


4. Using any 2 data points from #3, what observation can you draw about this company?

Reference no: EM131821221

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