1. Using the operating budget for the quarter, prepare the relevant costs for in-house production.
2. Given avoidable costs, calculate whether the outsourcing decision will save costs in total.

The data for the February master budget columns should come over from the operating budget worksheet.Verify that the master budget Net Income is the same as that reported in Sheet #1. Complete a flexible budget February, showing what net income should have been using the operating budget revenue rate, variable expenses' rates, and fixed costs.

1. Given actual results and the operating rates, get a flexible budget for 1 month. Actual operating results for the month are provided.
2. Calculate the variances between the flexible budget and actual results, as being either F for favorable or Ufor unfavorable. Determine how much of the Net Income variance was due to volume and how much was -related. Explain deviations from plan. How would you evaluate the actual results? What steps would you take to further investigate and possibly adjust your budget for the rest of the year?

Incremental Analysis: Do We Outsource?

1. Given the relevant costs from the operating budget, reparep a worksheet comparing the relevant data to a vendor's price quote for doing the p currently done in-house.
2. Given avoidable costs, calculate whether the outsourcing decision will save costs in total. Provide an opinion as to whether this business deal is acceptable. Are there any nonfinancial considerations?

O AutoSave O OFF THE 5 0 7 Corrected ACCT 301 Course Project Worksheet For Deliverable #2 Q @ v Home Insert Draw Page Layout Formulas Data Review View Tell me what you want to do Share Comments Calibri (Body) 11 VA A General Insert v 2 O Ex Delete Paste BIUV A $ ~ % 9 -00 Conditional Format Cell Format v X Sort & Find & Ideas Sensitivity Formatting as Table Styles Filter Select P20 X V fx A B C D E F G H I J K L M N O P Q R S T U V 2 Conduct Variance Analysis 3 Master Budget Actua Flex Budget Variances (flex. vs. actual) (A) Verify that the net income is the same as the Op Budget 4 Sales : February per Unit February per Unit February per Unit Total per Unit (B) Input the flex budget sales units, the per unit price, and total sales revenue 5 (C) Input the flex budget production cost per unit and calculate 6 Units 42,500 $ 9.50 35,000 9.85 (B) (F) the total flex variable production costs. Total Sales Revenue s 403,750 $ 344,750 (B) S (D) Input the flex budget variable selling costs per unit and calculate the total flex variable selling costs. (E) Input the flex budget fixed selling and administration costs 9 Variable Costs: (F) Calculate the variances between the actual and flex budget 10 Production 235,875 $ 5.55 190,750 $ 5.45 (C) $ (F) G) Input the spending variance 11 Selling 4,250 0.10 3.850 0.11 (D) (F) (H) Calculate the volume variance using the budgetted contribution margin 12 Total Variable Costs $ 240,125 $ 5.65 $ 194,600 $ 5.56 S $ $ 13 14 Contribution Margin 163,625 $ 3.85 $ 150,150 $ 4.29 S S 15 16 Fixed Costs: 17 Selling 52,500 60,000 52,500 (E) (F) 18 Administration 63,000 58,500 63,000 (E) (F) 19 Total Fixed Costs 115,500 118,500 115,500 20 21 Net Income $ 48,125 (A) $ (115,500) $ (F) 22 23 Master Budget vs. Actual Net Income Variance $ (16,475) 24 What is the volume variance (G) 25 What is the spending rate variance (H) 26 27 Operating Budget Cash Budget Variances Decisions Capital +