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# AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015

## Problem 1 Static Budget Variance

Banca Books, Inc., produces luxury checkbooks with three checks and stubs per
page. Each checkbook is designed for an individual customer and is ordered
through the customers bank. The companys operating budget for September
2014 included these data:
Number
of
Checkbooks
Selling price per
book
Variable cost per
book
Fixed costs for the
month

15
,000

Number
of
produced and sold

checkbooks

12,0
00

\$
20

\$
Average selling price per book

21

\$
8

\$
Variable cost per book

\$
145,000

\$
Fixed costs for the month

150,000

The executive vice president of the company observed that the operating income
for September was much lower than anticipated, despite a higher-than-budgeted
selling price and a lower-than-budgeted variable cost per unit. As the companys
management accountant, you have been asked to provide explanations for the
disappointing September results.
Banca Books, Inc., develops its flexible budget on the basis of budgeted peroutput-unit revenue and per-output-unit variable costs without detailed analysis
of budgeted inputs.
Bank Management develops its flexible budget on the basis of budgeted peroutput-unit revenue and per-output-unit variable costs without detailed analysis
of budgeted inputs.
1. Prepare a static-budget-based variance analysis of the September
performance.
2. Prepare a flexible-budget-based variance analysis of the September
performance.
3. Why might Bank Management find the flexible-budget-based variance
analysis more informative than the static-budget-based variance analysis?

## Problem 2- Flexible Budget Breakdowns

PT Alam Sejahtera is a manufacturing company in the snack industry. Earlier in
2013, the management decided to introduce a new product called Kacang
Premium, an assortment of nuts in a pack, and it will be manufactured in the
Karawang Barat Plant. As its name suggests, Kacang Premium uses only the best
ingredients and is seasoned with a secret ingredient. Kacang Premium will be
sold in packs of 150 grams, and made in batches. The Product Development
Manager has proposed that a batch of Kacang Premium (consisting of 200 packs)
consists of ingredients as below:

## AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015

Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto
Ingredient

Price of input

Pistachio

100 boxes

Walnut

80 boxes

120 boxes

Secret Seasoning

20 boxes

## Rp 70.000 per box

During the second quarter of 2013, the Production Manager of PT Alam Sejahtera
reported that Karawang Barat Plant has manufactured 150 batches of Kacang
Premium, and it has been distributed in several upscale supermarkets in
Jabodetabek. The quantity of inputs and price of inputs are reported as below.
Ingredients
Actual Quantity
Actual Cost
Actual Mix
Pistachio

16.640 boxes

Rp 856.960.000

32,5%

Walnut

11.520 boxes

Rp 402.048.000

22,5%

19.968 boxes

Rp 539.136.000

39%

Secret Seasoning

3.072 boxes

Rp 192.000.000

6%

Total Actual

51.200 boxes

Rp 1.990.144.000

100%

1. What is the budgeted cost of direct materials for the 30.000 packs?
2. Calculate the total direct materials efficiency variance.
3. Calculate the total direct materials mix and yield variances. What are these
variances telling you about the 30.000 packs produced this quarter? Are the
variances large enough to investigate?

## Problem 3 Market Share and Size Variance

AdiWear Company produces dry-fit t-shirt for joggers. Information pertaining to
AdiWears operations for May 2014 follows:

Units sold
Sales revenue
Variable cost ratio
Market size in units

Actual
230550
\$
3,412,140
68%
4,350,000

Budget
220000
\$
3,300,000
64%
4,400,000

## a. Compute the sales volume variance for May 2014

b. Compute the market-share and market-size variances for May 2014
c. Comment on possible reasons for the variance you computed in
requirement b

## AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015

Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto

## Problem 4 Variable and Fixed Overhead Variance

The Italiano Beread Company bakes baguettes for fistribution to upscale grocery
stores. The company has two direct-cost categories: DM and DML. Variable
manufacturing overhead is allocated to products on the basis of standard DMLhours. Following is osme budget date for the Italiano Bread Company
DM labor use

## 0.02 hours per baguette

10 per DML-hour

The Italiano Bread Company provides the following additional data for the year
ended December 31, 2014:
Planned (budgeted) output
Actual Production
DML
Actual Variable manufacturing Overhead

3,200,000
2,800,000
50,400
680,400

## 1. What is the denominator level used for allocating variable manufacturing

2. Prepare a variances analysis of variable manufacturing overhead
The Italiano Bread Company also allocates fixed manufacturing overhead to
products on the basis of standard DML-hours. For 2014, fixed manufacturing
overhead was budgeted at \$4.00 per DML-hours. Actual fixed manufacturing
overhead incurred during the year was \$272,000
1. Prepare a variance analysis of fixed manufacturing overhead cost
2. Is fixed overhead underallocated or overallocated?

## AM S1 Reguler [V] Flexibel Budget, Mar 19, 2015

Dosen : Thomas Honggo Setjokusumo, Asdos : Husnan Rianto

Homework
Boehringer Ingelheim budgeted prices for direct materials, direct manufacturing
labor, and direct marketing (distribution) labor per bottle are \$40, \$8, and \$ 12,
respectively. The president is pleased with the following performance report:
Actual
Costs

Static
Budget
\$

Direct Materials

364,000

\$
400,000

\$
Direct Manufacturing Labor
Direct Marketing (distribution)
labor

78,000

\$
36,000

\$
800,000

\$
110,000

Variance

722,000
\$

120,000

F
\$
F
\$

10,000

Actual output was 8,800 bottle. Assume all three direct-cost items shown are
variable costs. Is the presidents pleasure justified? Prepare a revised
performance report that uses a flexible budget and a static budget.