Budgeting and Net Operating Income Calculation in Khan

School: Post University - Course: ACCT 211H - Subject: Accounting

Unit 6 Chapter 9 Interactive Presentation(ACCT 211H) 1.Khan Corporation has budgeted the unit sales for April to be 5,000 units. The sales price is $25 per unit, and production costs are $10 per unit. Monthly utility expenses are estimated to be $2,000 plus $2 per unit, whereas selling expenses are estimated to be $12,000. The company pays a monthly rent of $2,000. What is the net operating income in the company's planning budget? $49,000 = [5,000 Units x $25] - [{5,000 Units x$10} + {$2,000 + (5,000 x $2)} + $12,000 + $2,000] = $125,000 - $76,000 =$49,000 2.Khan Corporation has budgeted the unit sales for April to be 5,000 units. The sales price is $25 per unit, and production costs are $10 per unit. Monthly utility expenses are estimated to be $2,000 plus $2 per unit, whereas selling expenses are estimated to be $12,000. The company pays a monthly rent of $2,000. What would be the utility expenses on the company's flexible budget if actual unit sales for April were 6,000 units? = $2,000 + [6,000 units x $2 per unit] = $2,000 + $12,000 = $14,000 B. Budget Solutions has determined from its flexible budget that selling costs for actual level activity for a period should have been $25,000. Actual selling costs incurred during the period were $28,000. What is the amount and direction of variance in selling costs? The Budgeted Selling cost = $25,000 Actual selling cost incurred = $28,000 $3,000 Unfavorable 3.The difference between the actual cost and budgeted cost at the actual level of activity is called a(n)spending variance. 4.The difference between the actual total revenue and budgeted total revenue at the actual level of activity is called a(n)revenue variance. 5.All of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT it eliminates the need for performing variance analysis 6.Pinnacle Corporation is a manufacturing company operating numerous machines. These require regular maintenance to keep them operational. The fixed portion of maintenance costs are $3,000 per month. Maintenance costs are also incurred at the rate of $5 per setup and $0.50 per unit produced. The company produced 23,000 units in 800 batches during a particular month. What will be the total cost of maintenance for this month? 7.The standard quantity per unit defines theamount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage. 8.A flexible budget performance report for variable manufacturing costs showsboth the activity variances and the spending variances. 9.The standard quantity allowed isthe amount of an input that should have been used to complete the actual output for the period. 10. Zeta Corporation is a manufacturer of sports caps, which require soft fabric. The standards for each cap allow 2.00 yards of soft fabric, at a cost of $2.00 per yard. During the month of January, the company purchased 25,000 yards of soft fabric at $2.10 per yard, to produce 12,000 caps. What is Zeta Corporation's materials price variance for the month of January? Material price variance = (Standard price-actual price)actual quantity purchased = (2-2.1)*25000 =2500 U 11. Most companies compute the materials price variance when raw materials arereceived from suppliers and transported to raw materials inventory. 12. The standard hours allowed isthe direct labor-hours that should have been used to complete the actual output for the period.

13.XXX Company Actual Hours of Input at Actual Rate (AH × AR)Actual Hours of Input at Standard Rate (AH × SR) Standard Hours of Input at Standard Rate (SH × SR) = (2,200 hours × $1.90) = (2,200 hours × $2.00) = (2,000 hours × $2.00) What is the spending variance? $180 U 14.XXX Company Actual Hours of Input at Actual Rate (AH × AR)Actual Hours of Input at Standard Rate (AH × SR) Standard Hours of Input at Standard Rate (SH × S) = (2,200 hours × $1.90) = (2,200 hours × $2.00) = (2,000 hours × $2.00) What is the labor rate variance? $220 F 15. When computing variable manufacturing overhead variances, the standard rate represents the variable portion of the predetermined overhead rate 16. Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variancewill be unfavorable. 17. Assume that direct labor-hours is used as the overhead allocation base. What is the variable overhead efficiency variance? Standard rate per direct labor-hour$ 2 Standard direct labor-hours for each unit produced3 Units manufactured1,000 Actual direct labor-hours worked during the month3,300 Total actual variable manufacturing overhead$ 6,600 Variable overhead efficiency variance = (1000*3-3300) *2 = 600 U