Prepare and Perform

a) What are your fixed costs? Segregate them in the budget model.b) Determine how variable costs change as activity measures change. How can this information be applied?c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activitymeasures or as a cost per unit of activity measure).d) Add actual activity measures to the model. Make sure all information is added accurately.e) Add the flexible budget calculations to the budget model. Make sure all information is accurate.f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances:i. Static budget variance, including sales volume and flexible budget variancesii. Price and efficiency variances for direct materials and direct laboriii. Spending and efficiency variances for variable manufacturing overheadg) Determine the aspects of the budgeting process that are in need of improvement. Justify your response.h) Interpret what budget variances represent. Should all variances be investigated?

Milestone One, Part I Product Costs materials - cedar materials - plastic materials - indirect factory worker labor shipping sales commissions Period Costs factory depreciation advertising office salaries factory utilities factory maintenance office rent liability insurance office depreciation Milestone One, Part II Use Table I on the MDE Manufacturing Budget to complete your calculations. Totals Budget $ 21.00 Sales Price per Unit Variable Costs Materials - Cedar Materials - Plastic Factory Worker Labor Materials - Indirect Shipping ($2.25/ea) Sales Commissions ($2/unit sold) Variable Cost per Unit 225,000 37,500 300,000 3,000 112,500 100,000 778,000 $15.56 778,000 / 50,000 Contribution Margin $ Totals Actual $ 820,996/47 $ 21.00 248,160 37,741 332,760 2,585 105,750 94,000 820,996 17.47 5.44 $3.63 78,000 12,000 5,000 12,000 20,000 5,000 1,000 48,000 181,000 78,000 12,000 4,500 12,000 20,000 5,000 1,000 48,000 180,500 Fixed Costs Factory Depreciation Factory Utilities Factory Maintenance and Repairs Office Rent Advertising Liability Insurance Office Depreciation Office Salaries Total Fixed Costs Using Budgeted Amounts Breakeven Point - Using Actual Amounts + 10,000 profit Using actual amounts + 10,000 profit 181,000 $5.44 180,500 190,500 33272 units 49,697 units 52,450 units Breakeven Point - Units at Current Sales Price New Contribution Margin Current Variable Costs New Sales Price $4.05 $17.47 $21.52 Milestone Two, Part I Use Tables I through IV on the MDE Manufacturing Budget to complete your calculations. Refer to Exhibit 7-2 on page 253 of the text From Flexible Budget Calculations Sheet Budget Model Units Sold Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Costs Fixed Manuf. Overhead Total Costs Gross Margin Actual 47,000 $991,700 248160 37741 332760 2585 621246 94500 715746 Flexible Budget Variance $4,700 Favorable/ Unfavorable Flexible Budget 47,000 Favorable favorable $987,000 211500 35250 282000 2820 531570 95000 626570 Sales Volume Variance ($63,000) Favorable/ Unfavorable Unfavorable -2491 unfavorable -50760 unfavorable Static Budget 50,000 $1,050,000 37,500 225000 300000 Milestone Two, Part II Use the variance supporting calculation tab to complete your calculations. Direct Materials - Cedar Direct Materials - Plastic Direct Labor Price Variance -22,560 1034 5640 Spending Variance Variable Manufacturing Overhead Efficiency Variance -14100 -3525 -56400 Efficiency Variance Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Manufacturing Costs Fixed Manufacturing Overhead Total Manufacturing Costs Gross Margin Budgeted Unit Amounts $ 21.00 4.50 Actual Volume 47,000 Flexible Budget Amount $987,000 47,000 211,500 Use Tables III and IV on the MDE Manufacturing Budget to complete your calculations. Development of Price and Efficiency Variances - Calculations Actual Ounces per Unit Actual Units Actual Ounces Used Actual Cost Actual Cost per Unit DM-Plastic DM-Cedar Actual Labor Cost per Hour Actual Labor Costs Actual Labor Hours Actual Units Actual Labor Hours per Unit Direct Manuf. Labor Actual Costs Incurred (Actual Input Qty. Actual Price) Actual Feet per Unit Actual Units Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Actual Input Qty. Budgeted Price Actual Price per Ounce Actual Units Actual Feet per Budgeted Cost Unit per Ounce Actual Units Budgeted Feet per Budgeted Cost per Unit Ounce Direct Material Plastic $ - $ $ - Price Variance $ $ $ - - Efficiency Variance Direct Material Cedar $ - $ $ Actual Units Actual Hours per Unit - Price Variance Actual Cost per Hour $ Actual Units Actual Hours per Unit Efficiency Variance Budgeted Cost per Hour Actual Units Budgeted Hours Budgeted Cost per per Unit Hour Direct Manufacturing Labor $ - $ $ - Price Variance $ $ Efficiency Variance Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Actual Input Qty. Budgeted Price Actual Costs Actual Costs Actual Units - Actual Feet per Budgeted Cost Unit per Foot Actual Units Budgeted Feet per Budgeted Cost per Unit Foot Variable manufacturing overhead $ - $ $ Spending Variance - $ $ Efficiency Variance - ACC 207 Final Project Milestone Two Guidelines and Rubric Overview: Classifying a company's costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost-volume-profit analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers. For Milestone Two, you will analyze the budget and actual costs using the MDE Manufacturing Budget (Tables I, II, III, IV). Determine where variances occurred and why. Submit the Student Workbook with Tabs 3 and 4 completed with your budgets/variances and a 1-2 page Word document that discusses the implications of your findings on MDE's financial considerations. Explain which aspects of MDE's budgeting process are in need of improvement and justify your response using your calculations. Address all critical elements listed below in Section II. Use Tabs 5 and 6 of the Student Workbook for your budget and variance calculations. Specifically, the following critical elements must be addressed: II. Prepare and Perform a) What are your fixed costs? Segregate them in the budget model. b) Determine how variable costs change as activity measures change. How can this information be applied? c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activity measures or as a cost per unit of activity measure). d) Add actual activity measures to the model. Make sure all information is added accurately. e) Add the flexible budget calculations to the budget model. Make sure all information is accurate. f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances: i. Static budget variance, including sales volume and flexible budget variances ii. Price and efficiency variances for direct materials and direct labor iii. Spending and efficiency variances for variable manufacturing overhead g) Determine the aspects of the budgeting process that are in need of improvement. Justify your response. h) Interpret what budget variances represent. Should all variances be investigated? Guidelines for Submission: Your paper must be submitted using the Student Workbook to present your budgets and variances and a 1-2 page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins to explain your findings. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Rubric Critical Elements Proficient (100%) Prepare and Identifies fixed costs and segregates Perform: Fixed Costs them in the budget model Prepare and Perform: Variable Costs Prepare and Perform: Budget Model Prepare and Perform: Actual Activity Prepare and Perform: Flexible Budget Calculations Prepare and Perform: Compare Flexible Budget Determines how variable costs change as activity measures change and describes how this information can be applied Creates a budget model and fixed costs are hard coded into the model Needs Improvement (75%) Not Evident (0%) Identifies fixed costs but does not segregate Does not identify fixed costs them in the budget model Determines how variable costs change as activity measures change but does not describe how this information can be applied Creates a budget model but fixed costs are not hard coded into the model Value 12 Does not determine how variable costs change as activity measures change 12 Does not create a budget model 12 Accurately adds actual activity measures Adds actual activity measures to the model to the model but contains errors related to accuracy Does not add actual activity 12 Accurately adds the flexible budget calculations to the budget model Does not add flexible budget calculations to the budget model 12 Does not compare the flexible budget to the actual expenses 12 Does not determine the aspects of the budgeting process that are in need of improvement Does not interpret what budget variances represent 12 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 4 Adds flexible budget calculations to the budget model but contains errors related to accuracy Compares the flexible budget to the Compares the flexible budget to the actual actual expenses, including key variances expenses but omits key variances or does specified, and interprets what this not interpret what this informs informs Prepare and Determines the aspects of the budgeting Determines the aspects of the budgeting Perform: Budgeting process that are in need of improvement process that are in need of improvement Process and justifies response but does not justify response Prepare and Interprets what budget variances Interprets what budget variances represent Perform: Budget represent and determines if all variances but does not determine if all variances Variances should be investigated should be investigated Articulation of Submission has no major errors related Submission has major errors related to Response to citations, grammar, spelling, syntax, citations, grammar, spelling, syntax, or or organization organization that negatively impact readability and articulation of main ideas 12 100% ACC 207 MDE Manufacturing Budget: Bird Feeder I. Sales and Manufacturing Expenses: Budget and Actual(2014) You will use this table to complete Milestones One and Two. Budget ($) Actual ($) 1,050,000 991,700 Expenses Materials -Cedar Materials -Plastic Factory Worker Labor Materials -Indirect Factory Depreciation Factory Utilities Factory Maintenance and Repairs Shipping ($2.25/each) Sales Commissions ($2.00/unit sold) Office Rent Advertising Liability insurance Office Depreciation Office Salaries 225,000 37,500 300,000 3,000 78,000 12,000 5,000 112,500 100,000 12,000 20,000 5,000 1,000 48,000 248,160 37,741 332,760 2,585 78,000 12,000 4,500 105,750 94,000 12,000 20,000 5,000 1,000 48,000 Total Expenses 959,000 1,001,496 Sales II. Contribution Margin: Static Budget and Actual Results (2014) You will use this table to complete Milestone Two. Actual Results Units Sold Revenues ($) Manufacturing Costs ($) Variable Fixed Gross Margin Static Budget Amount 47,000 991,700 50,000 1,050,000 621,246 94,500 275,954 565,500 95,000 389,500 III. Standard Variable Manufacturing Costs (2014) You will use this table to complete Milestone Two. Static Budget Costs Standard Input 225,000 37,500 300,000 3,000 3.0 ft/unit 1.0 ft/unit 0.5 hrs/unit 0.3 ft/unit Direct Materials: Cedar Direct Materials: Plastic Direct Manufacturing Labor Variable Manufacturing Overhead IV. Actual Variable Manufacturing Costs (2014) You will use this table to complete Milestone Two. Actual Costs Direct Materials: Cedar Direct Materials: Plastic Direct Manufacturing: Labor ($) Variable Manufacturing Overhead Actual Input 248,160 37,741 332,760 2,585 3.2 ft/unit 1.1 ft/unit 11.80/hr 0.25ft/unit