Question

Walcker Transportation Company’s general manager reports quarterly to the company president on the firm’s operating performance. The company uses a budget based on detailed expectations for the forthcoming quarter. The general manager has just received the condensed quarterly performance report shown in Exhibit 8-12.
Although the general manager was upset about not obtaining enough revenue, she was happy that her cost performance was favorable; otherwise, her net income would be even worse.
The president was not satisfied with the performance report and remarked, “I can see some merit in comparing actual performance with budgeted performance because we can see whether actual revenue coincided with our best guess for budget purposes. But I can’t see how this performance report helps me evaluate cost-control performance.”
1. Prepare a columnar flexible budget for Walcker Transportation at revenue levels of $12,600,000, $13,000,000, and $13,400,000. Use the format of the last three columns of Exhibit 8-3, page 313. Assume that the prices and mix of products sold are equal to the budgeted prices and mix.
2. Write out the flexible budget formula for costs as a function of revenue.
3. Prepare a condensed table showing the static budget variance, the sales-activity variance, and the flexible-budget variance. Use the format of Exhibit 8-6 , page 316 .



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  • CreatedNovember 19, 2014
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