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John Richardson is the manufacturing production supervisor for Benson Tool Works, a company that manufactures hand tools for mechanics. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, "This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 150,600 units. Well, it sold only 140,600. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 150,600 units goal and it sells 160,600. The company's making all kinds of money. You'd think I'd get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Benson's master budget and the actual results for the most recent year of operating activity follow. Number of units. Sales revenue Variable manufacturing costs Materials Labor Overhea Variable selling, general and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Master Budget 150,600 $33, 132,000 Actual Results 160,600 $35,653,200 (4,819,200) (5,020,000) (4,216,800) (4,417,000) (2,108,400) (2,299,000) (5,271,000) (5,770,000) 16,716,600 18,147,200 (7,861,320)) (6,997,000) $ 1,858,280 Variances For U 10,000 $2,521,200 F 500,800 U 200,200 190,600 U U 199,000 1,430,600 U F (7,780,000) (7,041,000) $ 3,326,200 $1,467,920 F 81,320 44,000 F U Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

John Richardson is the manufacturing production supervisor for Benson Tool Works, a company that manufactures hand tools for mechanics. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, "This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 150,600 units. Well, it sold only 140,600. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 150,600 units goal and it sells 160,600. The company's making all kinds of money. You'd think I'd get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Benson's master budget and the actual results for the most recent year of operating activity follow. Number of units. Sales revenue Variable manufacturing costs Materials Labor Overhea Variable selling, general and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Master Budget 150,600 $33, 132,000 Actual Results 160,600 $35,653,200 (4,819,200) (5,020,000) (4,216,800) (4,417,000) (2,108,400) (2,299,000) (5,271,000) (5,770,000) 16,716,600 18,147,200 (7,861,320)) (6,997,000) $ 1,858,280 Variances For U 10,000 $2,521,200 F 500,800 U 200,200 190,600 U U 199,000 1,430,600 U F (7,780,000) (7,041,000) $ 3,326,200 $1,467,920 F 81,320 44,000 F U Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 51E: Jackie Iverson was furious. She was about ready to fire Tom Rich, her purchasing agent. Just a month...
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John Richardson is the manufacturing production supervisor for Benson Tool Works, a company that manufactures hand tools for mechanics. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, "This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 150,600 units. Well, it sold only 140,600. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 150,600 units goal and it sells 160,600. The company's making all kinds of money. You'd think I'd get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Benson's master budget and the actual results for the most recent year of operating activity follow. Number of units. Sales revenue Variable manufacturing costs Materials Labor Overhea Variable selling, general and administrative costs. Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Master Budget 150,600 $33, 132,000 (4,819,200) (4,216,800) (2,108,400) (5,271,000) 16,716,600 (7,861,320)) (6,997,000) $ 1,858,280 Actual Results 160,600 $35,653,200 (5,020,000) (4,417,000) (2,299,000) (5,770,000) 18,147,200 Variances For U 10,000 $2,521,200 F U 500,800 200,200 190,600 199,000 U 1,430,600 F U U (7,780,000) (7,041,000) $ 3,326,200 $1,467,920 F 81,320 44,000 F U Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e.. zero variance).)
Transcribed Image Text:John Richardson is the manufacturing production supervisor for Benson Tool Works, a company that manufactures hand tools for mechanics. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, "This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 150,600 units. Well, it sold only 140,600. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 150,600 units goal and it sells 160,600. The company's making all kinds of money. You'd think I'd get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Benson's master budget and the actual results for the most recent year of operating activity follow. Number of units. Sales revenue Variable manufacturing costs Materials Labor Overhea Variable selling, general and administrative costs. Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Master Budget 150,600 $33, 132,000 (4,819,200) (4,216,800) (2,108,400) (5,271,000) 16,716,600 (7,861,320)) (6,997,000) $ 1,858,280 Actual Results 160,600 $35,653,200 (5,020,000) (4,417,000) (2,299,000) (5,770,000) 18,147,200 Variances For U 10,000 $2,521,200 F U 500,800 200,200 190,600 199,000 U 1,430,600 F U U (7,780,000) (7,041,000) $ 3,326,200 $1,467,920 F 81,320 44,000 F U Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e.. zero variance).)
variable selling, general and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Number of Units Sales revenue Variable manufacturing costs Materials Labor Overhead Variable Selling, general & administrative Contribution margin Fixed costs Manufacturing overhead Selling, general & administrative Net income 15,211,000) (5,110,000) 16,716,600 18,147,200 Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) $ (7,861,320) (7,780,000) (6,997,000) (7,041,000) $ 1,858,280 Flexible Budget Actual Results 150,600 160,600 3,313,200 $ 35,653,200 $ (5,020,000) (4,417,000) (2,299,000) (5,770,000) 18,147,200 (7,780,000) (7,041,000) 3,326,200 Variances None F $ 3,326,200 $1,467,920 F F F U None U 199,000 1,430,600 F 81,320 44,000 F U F F U
Transcribed Image Text:variable selling, general and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs Net income Number of Units Sales revenue Variable manufacturing costs Materials Labor Overhead Variable Selling, general & administrative Contribution margin Fixed costs Manufacturing overhead Selling, general & administrative Net income 15,211,000) (5,110,000) 16,716,600 18,147,200 Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) $ (7,861,320) (7,780,000) (6,997,000) (7,041,000) $ 1,858,280 Flexible Budget Actual Results 150,600 160,600 3,313,200 $ 35,653,200 $ (5,020,000) (4,417,000) (2,299,000) (5,770,000) 18,147,200 (7,780,000) (7,041,000) 3,326,200 Variances None F $ 3,326,200 $1,467,920 F F F U None U 199,000 1,430,600 F 81,320 44,000 F U F F U
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