flexible budgets, variances, and management control i：弹性预算，方差，和管理控制我

Flexible Budgets, Variances,and Management Control: I,Chapter 7,Distinguisha static budgetfrom a flexible budget.,Learning Objective 1,Static and Flexible Budgets,Static Budget,Planned level ofoutput at start ofthe budget period,Based on,Flexible Budget,Budgeted revenuesand cost based onactual level of output,Based on,Static Budget Example,Assume that Pasadena Co. manufacturesand sells dress suits.,Budgeted variable costs per suit are as follows:Direct materials cost$ 65Direct manufacturing labor 26Variable manufacturing overhead 24Total variable costs$115,Static Budget Example,Budgeted selling price is $155 per suit.,Fixed manufacturing costs are expectedto be $286,000 within a relevant rangebetween 9,000 and 13,500 suits.,Variable and fixed period costs are ignored.,The static budget for year 2004 is basedon selling 13,000 suits.,What is the static-budget operating income?,Static Budget Example,Revenues (13,000 $155) $2,015,000Less Expenses:Variable (13,000 $115) 1,495,000Fixed 286,000Budgeted operating income $ 234,000,Assume that Pasadena Co. produced and sold10,000 suits at $160 each with actual variablecosts of $120 per suit and fixed manufacturingcosts of $300,000.,Static Budget Example,Revenues (10,000 $160)$1,600,000 Less Expenses: Variable (10,000 $120) 1,200,000 Fixed 300,000 Actual operating income$ 100,000,What was the actual operating income?,Static-Budget Variance Example,What is the static-budget variance ofoperating income?,Actual operating income$100,000Budgeted operating income 234,000Static-budget variance of operating income$134,000 U,This is a Level 0 variance analysis.,Static-Budget Variance Example,Static-Budget Based Variance Analysis(Level 1) in (000),Static Budget Actual VarianceSuits 13 10 3 URevenue$2,015$1,600$415 UVariable costs 1,495 1,200 296 FContribution margin$ 520$ 400$120 UFixed costs 286 300 14 UOperating income$ 234$ 100$134 U,Learning Objective 2,Develop a flexible budgetand compute flexible-budgetvariances and sales-volumevariances.,Steps in Developing Flexible Budgets,Step 1:Determine budgeted selling price, variablecost per unit, and budgeted fixed cost.,Budgeted selling price is $155,variable cost is $115 per suit, andthe budgeted fixed cost is $286,000.,Steps in Developing Flexible Budgets,Step 2:Determine the actual quantity of output.In the year 2004, 10,000 suits wereproduced and sold.,Step 3:Determine the flexible budget for revenues. $155 10,000 = $1,550,000,Steps in Developing Flexible Budgets,Step 4:Determine the flexible budget for costs.Variable costs: 10,000 $115 = $1,150,000Fixed costs 286,000Total costs $1,436,000,Variances,Level 2 analysis provides informationon the two components of thestatic-budget variance.,1. Flexible-budget variance,2. Sales-volume variance,Flexible-Budget Variance,Flexible-Budget Variance(Level 2) in (000),Flexible BudgetActual VarianceSuits 10 10 0Revenue$1,550$1,600$ 50 FVariable costs 1,150 1,200 50 UContribution margin$ 400$ 400$ 0Fixed costs 286 300 14 UOperating income$ 114$ 100$ 14 U,Flexible-Budget Variance,Actual quantity sold: 10,000 suits,Flexible-budgetvariance$14,000 U,Actual resultsoperating income$100,000,Flexible-budgetoperating income$114,000,Flexible-Budget Variance,Total flexible-budget variance= Total actual results Total flexible budget for actual sales level,Flexible-Budget Variance,Actual Budgeted Amount AmountSelling price$160$155Variable cost 120 115Contribution margin$ 40$ 40,Flexible-Budget Variance,Why is the flexible-budget variance $14,000 U?,Selling-price variance$50,000 F,Actual variable costs exceededflexible budget variable costs 50,000 U,Actual fixed costs exceededflexible budget fixed costs 14,000 U,Total flexible-budget variance$14,000 U,Sales-Volume Variance,Sales-Volume Variance(Level 2) in (000),Flexible StaticSales-VolumeBudgetBudgetVarianceSuits1013 3 URevenue$1,550$2,015$465 UVariable costs 1,150 1,495 295 FContr. margin$ 400$ 520$120 UFixed costs 286 286 0Operating income$ 114$ 234$120 U,Sales-Volume Variance,Actual quantity sold: 10,000 suits,Sales-volumevariance$120,000 U,Flexible-budgetoperating income$114,000,Static-budgetoperating income$234,000,Sales-Volume Variance,Total sales-volume variance $120,000 U,=,Actual sales unit Master budgeted sales units13,000 10,000 = 3,000,Budgeted contribution margin per unit $40,Budget Variances,Static-budgetvariance$134,000 U,Flexible-budgetvariance$14,000 U,Level 1,Sales-volumevariance$120,000 U,Level 2,Learning Objective 3,Explain why standard costs areoften used in variance analysis.,Standards,Pasadenas budgeted cost for each variabledirect cost item is computed as follows:,Standard inputallowed forone output unit,Standard costper input unit,Standards,4.00 square yards allowed per output unit at $16.25 standard cost per square yard.,Standard cost per output unit 4.00 $16.25 = $65.00,Standards,2.00 manufacturing labor-hours of inputallowed per output unit at $13.00 standardcost per hour.,Standard cost per output unit2.00 $13.00 = $26.00,Learning Objective 4,Compute price variancesand efficiency variancesfor direct-cost categories.,Actual Data,Direct materials purchased and used:42,500 square yards at $15.95,Labor hours: 21,500 at $12.90,Cost of direct materials = $677,875,Cost of direct manufacturing labor = $277,350,Price Variance Example,Direct-material price variance,Actual price Budgeted price,Actualquantity,($15.95 $16.25) 42,500 = $12,750 F,=,=,Price Variance Example,Direct-labor price variance,Actual price Budgeted price,Actualquantity,($12.90 $13.00) 21,500 = $2,150 F,=,=,Price Variance Example,What is the journal entry when the materials pricevariance is isolated at the time of purchase?,Materials Control 690,625Direct-Materials Price Variance 12,750Accounts Payable Control 677,875To record direct materials purchased,Efficiency Variance Example,Direct-material efficiency variance,Actual quantity Standard quantity,Standardprice,(42,500 40,000) $16.25 = $40,625 U,=,=,Efficiency Variance Example,Direct-labor efficiency variance,Actual quantity Standard quantity,Standardprice,(21,500 20,000) $13.00 = $19,500 U,=,=,Efficiency Variance,What is the journal entry to record materials used?,Work in Process Control650,000Direct-Materials Efficiency Variance 40,625Materials Control 690,625To record direct materials used,Price and Efficiency Variance,What is the journal entry for direct manufacturing labor?,Work in Process Control260,000Direct ManufacturingLabor Efficiency Variance 19,500Direct-ManufacturingLabor Price Variance 2,150Wages Payable277,350To record liability for direct manufacturing labor,Flexible Budget MaterialVariance Example,ActualCost$677,875,BQ BP40,000 $16.25$650,000,AQ BP42,500 $16.25$690,625,$12,750 F,$40,625 U,$27,875 U,Flexible Budget LaborVariance Example,ActualCost $277,350,BQ BP20,000 $13.00$260,000,AQ BP21,500 $13.00$279,500,$2,150 F,$ 19,500 U,$17,350 U,Static-budget varianceMaterials$167,125 FLabor 60,650 FTotal$227,775 F,Flexible-budget varianceMaterials$27,875 ULabor 17,350 UTotal$45,225 U,Sales-volume varianceMaterials$195,000 FLabor 78,000 FTotal$273,000 F,Level 1,Level 2,Variance Analysis,Level 2,Flexible-budget varianceMaterials$27,875 ULabor 17,350 UTotal$45,225 U,Price varianceMaterials$12,750 FLabor 2,150 FTotal$14,900 F,Efficiency varianceMaterials$40,625 ULabor 19,500 UTotal$60,125 U,Level 2,Level 3,Variance Analysis,Level 3,Learning Objective 5,Explain why purchasingperformance measures shouldfocus on more factors thanjust price variances.,Performance MeasurementUsing Variances,Effectiveness is the degree to which apredetermined objective or target is met.,Efficiency is the relative amount of inputsused to achieve a given level of output.,Variances should not solely be used toevaluate performance.,When to Investigate Variances,When should variances be investigated?,Subjective judgments,Rules of thumb as “investigate all variancesexceeding $10,000 or 25% of expected cost,whichever is lower.”,Learning Objective 6,Integrate continuousimprovementinto variance analysis.,Continuous Improvement,Assume that the budgeted direct materials cost foreach suit that Pasadena Co. manufactures is $65.,Pasadena Co. wants to implement continuousimprovement budgets based on a target 1%materials cost reduction each period.,What should the budgeted cost be for thenext 3 subsequent periods?,Continuous Improvement,Prior Period Reduction Revised Budgeted in Budgeted Amount Budget AmountThis Period: $65.00Period 1: $65.00 $0.650 $64.35Period 2: $64.35 $0.644 $63.71Period 3: $63.71 $0.637 $63.07,Learning Objective 7,Perform variance analysis inactivity-based costing systems.,Flexible Budgeting andActivity-Based Costing,Materials costs and direct manufacturing laborcosts are examples of output-unit level costs.,Batch-level costs are resources sacrificedon activities that are related to a group ofunits of product(s) or service(s) rather thanto each individual unit of product or service.,Flexible Budgeting andActivity-Based Costing,Denver Co. produces metal planters (MP).,Assume that material-handling labor costs varywith the number of batches produced ratherthan the number of units in a batch.,Material-handling labor costs are direct batchlevel costs that vary with the number of batches.,Flexible Budgeting and Activity-Based Costing,StaticActualBudget AmountsUnits produced and sold18,00015,660Batch size 180 174Number of batches 100 90Material-handling labor-hours per batch 5.00 5.20,Flexib