Part 3

Moving Inc. wants to develop an activity flexible budget for the activity of moving materials.

Moving Inc. uses forklifts to move materials from receiving to storeroom and then to production.

The forklifts are also used to move material from storeroom to the production area, which the company considers one move.

Crates are used to store the parts and are emptied only when used in production.

The crates are disposed of after a move from receiving to the storeroom to production are complete.

8

The forklifts are leased

$18,000

per year per forklift

25

Forklift operators

$50,000

year average salary

Each crate costs

$1.80

Fuel costs for Forklift

$3.60

per gallon

A gallon is used for

10

moves

Forklifts can make

3

Moves per hour

Forklifts are used

280

Days per year

Each operator works

40

Hours per week

Required:

1. Prepare a flexible budget like exhibit 12.4 for the activity of moving materials, but you will use the number of moves as the activity driver.

Use

60,000

moves and

80,000

moves

2. What if the actual costs incurred were the amounts below for 60,000 moves.

Prepare an activity-based performance report like exhibit 12.6 to present a comparison of actual to budget with a budget variance determine.

You must also designate U or F if there is a variance. If there is no variance you can leave the designation blank, since the variance of zero is not U or F. You must use the IF Function to designate U or F to earn credit.

Activity

Actual cost

Salaries

$1,290,000

Leases

144,000

Crates

118,000

Fuel

24,000

3. Explain what type of value that the moving activity provides the company. Provided a recommendation on what the company should attempt to do with this activity.