Spruce Street Shelter: Budget Variances
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Using the Spruce Street Shelter case, please assist with these questions:
1. What is your assessment of the method the administrator used to construct the budget?
2. Prepare a flexible budget for the laundry department. What does it tell you?
3. Compute the appropriate labor variances. What do they tell you?
4. What should Mr. Donaldson tell the administrator about his budget variances?
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Solution Summary
Responsibility accounting vs. Flexible budgeting for a laundry department.
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1.What is your assessment of the method the administrator used to construct the budget?
The business model of Spruce Street Shelter depends largely on factors such as weather conditions and unexpected necessities.
From the budget drawn by the administrator it is evident that the administrator excluded all the probabilities that might increase the costs and also did not consider seasonal factor. The budgeting method of the administrator is criticized for below reasons:
a. Excluding Seasonal Changes: Costs depend on the seasonal necessities such as the higher ...
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
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