Styles : APA

Subject Category : Accounting

Preferred language : English US

References : 5

Description : Assignment 5: Construct a Flexible Budget Instructions:

This week, You will apply what you have learned about budgeting, oversight, and control by Respond to the problem using Microsoft Excel to construct and analyze a flexible budget.

Support your paper with at least five (5) scholarly journal articles.

Length: 6 pages (not including title and reference pages).

Accounting Problem: Problem: Master Budget, Flexible Budget, and Profit-Variance Analysis; Spreadsheet Application Going into the period just ended, Ortiz & Co., manufacturer of a moderately priced espresso maker for retail sale, had planned to produce and sell 3,900 units at $100 per unit. Budgeted variable manufac- turing costs per unit are $50. Ortiz pays its salespeople a 10% sales commission, which is the only variable nonmanufacturing cost for the company. Fixed costs are budgeted as follows: manufactur- ing, $50,000, marketing, $36,000. Actual financial results for the period were disappointing. While sales volume was up (4,000 units sold), actual operating profit was only $20,000 for the period. Fixed manufacturing costs were as budgeted, but fixed marketing expenses exceeded budget by $4,000. Actual sales revenue for the period was $390,000, and actual variable costs were $70 per unit (the actual sales commission was 10% of sales revenue generated).

Required 1. Develop an Excel spreadsheet that is able to produce a profi t-variance report similar to the one presented in text Exhibit 14.4.

2. Use the spreadsheet you developed in (1) and the data presented above to complete the profi t- variance report for the period. Below the table you create, show separately the following variances: (a.) Total master (static) budget variance (i.e., the total operating-income variance for the period). (b.) Total fl exible-budget variance. (c.) Flexible-budget variance for total variable costs, plus the fl exible-budget variance for: (1) Variable manufacturing costs. (2) Variable nonmanufacturing costs. (d.) Flexible-budget variance for total fi xed costs, plus the fl exible-budget variance for: (1) Fixed manufacturing costs. (2) Fixed nonmanufacturing costs.

3. Provide a concise interpretation for each of the variances calculated above in (2).

4. Using the variances you calculated above in (2) and, in as much detail as the data allow, prepare a sepa- rate summary report