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# Burton Transportation Co., Skold Instruments, Scottish Desig

Items 8-A1, 8-A3, and 8-26 (circled). Please show all work/calculations. Any questions you may have will get quick responses. thanks!

8-A1 Flexible and Static Budgets

Burton Transportation Company's general manager reports quarterly to the company president on the firm's operating performance. The company uses a budget based on detailed expectations for the forthcoming quarter. The general manager has just received the condensed quarterly performance report shown in Exhibit 8-10.
Although the general manager was upset about not obtaining enough revenue, she was happy that her cost performance was favorable; otherwise, her net operating income would be even worse.
The president was totally unhappy and remarked, "I can see some merit in comparing actual performance with budgeted performance because we can see whether actual revenue coincided with our best guess for budget purposes. But I can't see how this performance report helps me evaluate cost-control performance."

1. Prepare a columnar flexible budget for Burton Transportation at revenue levels of \$7,600,000, \$8,000,000, and \$8,400,000. Use the format of the last three columns of Exhibit 8-2, page 345. Assume that the prices and mix of products sold are equal to the budgeted prices and mix.

2. Write out the flexible budget formula for costs as a function of revenue.

3. Prepare a condensed table showing the static budget variance, the sales-activity variance, and the flexible-budget variance. Use the format of Exhibit 8-5, page 347.

8-A3 Direct-Material and Direct-Labor Variances

Skold Instruments manufactures trumpets, trombones, tubas, and other brass instruments. The following standards were developed for a line of trumpets.

Standard Inputs Expected
For Each Unit of Output Standard Price per
Achieved Unit of Input
Direct materials 5 pounds \$10 per pound
Direct labor 10 hours \$25 per hour

During April, Skold scheduled 550 trumpets for production. However, the company produced only 525.
Skold purchased and used 2,700 pounds of direct materials at a unit price of \$8.50 per pound. It used 5,700 hours of direct labor at an actual rate of \$26.00 per hour.

1. Compute the standard cost per trumpet for direct materials and direct labor.

2. Compute the price variances and quantity variances for direct materials and direct labor.

3. Based on there sketchy data, what clues for investigation are provided by the variances?

8-26 Flexible Budget

Scottish Designs has a department that makes high-quality leather cases for iPods. Consider the following data for a recent month.
Fill in the unknowns.

#### Solution Preview

8-A1 Flexible and Static Budgets

Burton Transportation Company's general manager reports quarterly to the company president on the firm's operating performance. The company uses a budget based on detailed expectations for the forthcoming quarter. The general manager has just received the condensed quarterly performance report shown in Exhibit 8-10.
Although the general manager was upset about not obtaining enough revenue, she was happy that her cost performance was favorable; otherwise, her net operating income would be even worse.
The president was totally unhappy and remarked, "I can see some merit in comparing actual performance with budgeted performance because we can see whether actual revenue coincided with our best guess for budget purposes. But I can't see how this performance report helps me evaluate cost-control performance."

1. Prepare a columnar flexible budget for Burton Transportation at revenue levels of \$7,600,000, \$8,000,000, and \$8,400,000. Use the format of the last three columns of Exhibit 8-2, page 345. Assume that the prices and mix of products sold are equal to the ...

#### Solution Summary

This solution is comprised of a detailed explanation to prepare a columnar flexible budget for Burton Transportation at revenue levels of \$7,600,000, \$8,000,000, and \$8,400,000.

\$2.19