1.

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pools monthly planning budget is based on operating 21 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

Boyne University Motor Pool Cost Control Report For the Month Ended March 31
	March Actual			Planning Budget			(Over) Under Budget
Miles		56,700			48,700
Autos		22			21
Gasoline	$	10,220		$	9,253		$	(967	)
Oil, minor repairs, parts		4,230			3,896			(334	)
Outside repairs		765			588			(177	)
Insurance		1,465			1,344			(121	)
Salaries and benefits		8,610			8,610			0
Vehicle depreciation		4,158			3,969			(189	)
Total	$	29,448		$	27,660		$	(1,788	)

The planning budget was based on the following assumptions:

a.	$0.19 per mile for gasoline.
b.	$0.08 per mile for oil, minor repairs, and parts.
c.	$28 per automobile per month for outside repairs.
d.	$64 per automobile per month for insurance.
e.	$8,610 per month for salaries and benefits.
f.	$189 per automobile per month for depreciation.
The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pools performance.

Required:
1.	Complete the performance report for March based on a flexible budget that shows spending variances. (Round "per mile" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Boyne University Motor Pool
Spending Variances
For the Month Ended March 31
	Planning Budget Assumptions		Actual Results	Flexible Budget	Spending Variances
Miles			56,700	56,700
Autos			22	22
Gasoline		per mile	$10,220			F
Oil, minor repairs, parts		per mile	4,230			F
Outside repairs		per automobile	765			U
Insurance		per automobile	1,465			U
Salaries and benefits		per month	8,610			None
Vehicle depreciation		per automobile	4,158			None
Total			$29,448	$0		F

2.

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the companys costing system and do what you can to help us get better control of our manufacturing overhead costs. You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

	Cost Formula	Actual Cost in March
Utilities	$16,900 plus $0.15 per machine-hour	$	22,000
Maintenance	$38,200 plus $1.40 per machine-hour	$	62,800
Supplies	$0.40 per machine-hour	$	8,600
Indirect labor	$94,200 plus $1.20 per machine-hour	$	121,500
Depreciation	$68,500	$	70,200

During March, the company worked 20,000 machine-hours and produced 14,000 units. The company had originally planned to work 22,000 machine-hours during March.

Required:

1.	Complete the report showing the activity variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

FAB Corporation
Activity Variances
For the Month Ended March 31
Utilities		F
Maintenance		F
Supplies		F
Indirect labor		F
Depreciation		None
Total		F

2.	Complete the report showing the spending variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

FAB Corporation
Spending Variances
For the Month Ended March 31
Utilities		U
Maintenance		F
Supplies		U
Indirect labor		U
Depreciation		U
Total		U

3.

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the companys costs:

Fixed Cost per Month

Cost per Car Washed

Cleaning supplies				$	0.80
Electricity	$	1,200		$	0.15
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.30
Depreciation	$	6,000
Rent	$	8,000
Administrative expenses	$	4,000		$	0.10

For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 per car washed.

Required:

Complete the companys planning budget for August.

Lavage Rapide
Planning Budget
For the Month Ended August 31
Revenue
Expenses:
Cleaning supplies
Electricity
Maintenance
Wages and salaries
Depreciation
Rent
Administrative expenses
Total expense	0
Net operating income	$0