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id=241129

Learning Guide Unit 5

Site: University of the People

BUS 5110 Managerial Accounting -
Course:
AY2021-T4
Book: Learning Guide Unit 5
Printed by: Haitham Elhassan
Date: Saturday, 5 June 2021, 1:23 PM

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Description

Learning Guide Unit 5

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Learning Guide Unit 5 https://my.uopeople.edu/mod/book/tool/print/index.php?id=241129

Table of contents

Overview

Introduction

Reading Assignment

Discussion Assignment

Written Assignment

Group Activity

Portfolio Activity

Checklist

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Overview

Unit 5: Budgets - Operations and Flexible

Topics:

Master budget and its components

Standard costs
Variance analyses: usage, e�ciency, and price

Learning Objectives:

By the end of this Unit, you will be able to:

1. Explain the budget development process for a manufacturing company versus a service
company.
2. Discuss the main types of variances (materials usage, labor e�ciency, and price) and how
they are calculated.
3. Evaluate operational results.
4. Recommend courses of action to improve operational results.

Tasks:

Peer-assess Unit #4 Written Assignment

Read through the Learning Guide and the Reading Assignment
Complete the Discussion Assignment by posting in the Discussion Forum
Respond to and rate three of your fellow classmates’ posts in the Discussion Forum
Complete and submit the Case Study/ Written Assignment
Complete the Portfolio Assignment
Continue work on the Group Project

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Introduction

Whether in our personal lives or in business, most of us are probably familiar with the concept of
a budget. From an operational perspective, it is essentially the forecast of how much funds are
expected to be received in a given time period and how much in payments are estimated to be
expended. The net result is earnings or pro�t. As part of the “master” budget process, budgets are
set not only for operational objectives – e.g., an income statement level budget but also for the
balance sheet and cash �ows. All of these are discussed in this unit. Due to the scrutiny of the
income statement (recall our �nancial statement analyses from Unit 1), much focus is on the
operational “income statement” budget. The income statement budget is derived from several
components, including the sales, production, overhead, and selling and general administrative
(SG&A) expenses budgets.

In business, budgets are generally set for the year late in the preceding year, though they can be
set more or less frequently. These budgets are then used as benchmarks to assess business
performance. Issues with the initial or “master” budget are that it is based on a certain level of
volume set at speci�c estimated per-unit costs (referred to as standard costs); and at expected
rates of materials used/hours worked.

What if volumes change? If volume changes are expected to be more than temporary, a company
may use a “�exible” budget to adjust the master budget for the changes in volume.

However, what if costs change? What if more or fewer materials or labor hours are used? How
does a company know how much of variance is due to cost versus materials or labor changes?
Here is where analyses are done to review variances due to:

costs varying from the standard (“price” variance)

material used varying from the standard (“materials usage” variance)
labor hours expended varying from the standard (“labor e�ciency” variance)

Once the root causes of variances are identi�ed, management can develop speci�c action plans to
address them.

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Reading Assignment

1. Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers. https://2012books.lardbucket.org

/books/accounting-for-managers/index.html

Chapter 9 – How Are Operational Budgets Created?

Chapter 10 – How Do Managers Evaluate Performance Using Cost Variance Analysis?

This text explains the budgeting process and how managers use budgets to evaluate
performance. It describes �exible budgets and introduces standard costs, which are used to
calculate budget variances. Illustrations using applied examples are also provided.

Optional Video

1. Chegg. (2016, April 5). Static and Flexible Budgets [Video]. YouTube.

Static and Flexible Budgets | Accountin…

 (12:36)

This video illustrates and explains static budgets versus �exible budgets and the bene�ts of using
�exible budgeting.

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Discussion Assignment

In the discussion forum, you are expected to participate often and engage in deep levels of
discourse. Please post your initial response by Sunday evening and continue to participate
throughout the unit. You are required to post an initial response to the question/issue presented
in the Forum and then respond to at least 3 of your classmates’ initial posts. You should also
respond to anyone who has responded to you. 

Your Discussion should be a minimum of 250 words in length and not more than 450 words.
Please include a word count. Following the APA standard, use references and in-text citations for
the textbook and any other sources. 

Continuing with the company selected in Unit 2, discuss how the income statement budget would
be created for a year starting with the sales budget through the SG&A budget. Be sure to:

Be speci�c in describing the component line items of each 

Identify the individuals that would be involved in developing the budgets

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Written Assignment

Submit a paper which is 2-3 pages in length (no more than 3-pages), exclusive of the reference
page. Paper should be double spaced in Times New Roman (or its equivalent) font which is no
greater than 12 points in size. The paper should cite at least two sources in APA format.  One
source can be your textbook.

Please describe the circumstances of the following case study and recommend a course of action.
Explain your approach to the problem, perform relevant per unit calculations and analysis, and
formulate a recommendation. Ensure your work and recommendation are thoroughly supported.

Case Study:

Papaya Partners is a distributor of papayas. They purchase papayas from individual growers and
package them in 10-pound cartons for delivery to their various customers, generally
supermarkets. Last month, they budgeted to sell $500,000 worth of cartons at a price of $25 each.
Actual sales met a budget of $500,000 at $25 per carton.

Management has received cost information based on actual performance and needs to
understand the drivers of the overall variance from the budget. They have asked you, as an
analyst in their management accounting department, to calculate and explain the variances. The
following data has been provided:

Budget
Cost of fruit @ 10 pounds per carton    $      200,000
Cost of packaging @ 1 pound per carton    $        10,000
Labor costs @ .5 hours per carton    $        90,000
Total Cost    $      300,000

Actual 
Cost of fruit @ 10 pounds per carton    $      244,200
Cost of packaging @ .55 pound per carton    $        11,000
Labor costs @ .75 hours per carton    $      150,000
Total Cost    $      405,200

Unfavorable variance    $105,200.00

Speci�cally, management needs to know the:

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Standard cost per unit (carton)

Actual cost per unit
Direct materials price variances
Direct materials usage variances
Direct labor rate variance
Direct labor e�ciency variance

In addition, they would like to understand how the variances are calculated and what caused
them. They would also like a recommendation on what might be done to improve the variances.

For this assignment, compute all required amounts and explain how the computations were
performed. Describe whom you would work with to determine the causes of the variances and
hypothesize on what caused the variances. Based on your analysis, recommend actions that
management could take to improve the variances.

Superior papers will:

Perform all per unit calculations correctly.

Articulate how the calculations were performed.
Assess the variances computed and evaluate the operational results (i.e., is performance
better or worse than budgeted?).
Explain with whom you would work to identify the root causes of the variances.
Propose well-thought-out causes for each variance.
Conclude on which variances require management’s attention and recommend courses of
action.

Be sure to use APA formatting in your paper.  Purdue University’s Online Writing LAB (OWL) is a
free website that provides excellent information and resources for understanding and using the
APA format and style. The OWL website can be accessed here: http://owl.english.purdue.edu
/owl/resource/560/01/

This assignment will be assessed using the BUS 5110 Unit 5 Written Assignment rubric

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Group Activity

Continue working on the Group Project. At this point, the course material covered provides all the
tools necessary to complete Parts I and II of the project.

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Portfolio Activity

This unit has focused on manufacturing companies; however, many companies are service
operations that do not sell a physical product. For this portfolio assignment, select a for pro�t
service company and describe the process it would use to create a master budget. How would the
budget process for the service company di�er from a manufacturing company? Be speci�c.

As portfolio activities are to be self-re�ective, please make sure to connect the portfolio
assignment to:

Personal experiences. Re�ect on how this assignment topic is applicable to and will bene�t
you.
Course readings and any external readings.
Discussion forum posts or other course objectives.

The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use
APA citations and references if you use ideas from the readings or other sources.

This assignment will be assessed using the Portfolio rubric

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Checklist

Peer-assess Unit #4 Written Assignment

Read through the Learning Guide and the Reading Assignment
Complete the Discussion Assignment by posting in the Discussion Forum
Respond to and rate three of your fellow classmates’ posts in the Discussion Forum
Complete and submit the Case Study/ Written Assignment
Complete the Portfolio Assignment
Continue work on the Group Project

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