7-28 Static and flexible budgets, service sector. Student Finance (StuFi) is a startup that aims to usethe power of social communities to transform the student loan market. It connects participants througha dedicated lending pool, enabling current students to borrow from a school's alumni community. StuFi'srevenue model is to take an upfront fee of 40 basis points (0.40%) each from the alumni investor and thestudent borrower for every loan originated on its platform.StuFi hopes to go public in the near future and is keen to ensure that its financial results are in line with thatambition. StuFi's budgeted and actual results for the third quarter of 2014 are presented below.HomeInsertAPage Layout12New loans originated3 Average amount of loan4 Variable costs per loan:5Professional labor6Credit verification7Federal documentation fees8Courier services9 Administrative costs (fixed)10 Technology costs (fixed)BFormulasStatic Budget8,200$145,000Data Reviewс$360 (8 hrs at $45 per hour)$100$120$50$800,000$1,300,000DViewEActual Results10,250$162,000$475 (9,5 hrs at $50 per hour)$100$125$54$945,000$1,415,0001. Prepare StuFi's static budget of operating income for the third quarter of 2014.2. Prepare an analysis of variances for the third quarter of 2014 along the lines of Exhibit 7-2; identify thesales volume and flexible budget variances for operating income.3. Compute the professional labor price and efficiency variances for the third quarter of 2014.4. What factors would you consider in evaluating the effectiveness of professional labor in the thirdquarter of 2014.Required

Static budget is a forecasted reports of revenue and expenses for a specific period of time which…

1. Prepare StuFi's static budget of operating income for the third quarter of 2014. 2. Prepare an analysis of variances for the third quarter of 2014 along the lines of Exhibit 7-2; identify the sales volume and flexible budget variances for operating income. 3. Compute the professional labor price and efficiency variances for the third quarter of 2014. 4. What factors would you consider in evaluating the effectiveness of professional labor in the third quarter of 2014.

1. Prepare StuFi's static budget of operating income for the third quarter of 2014. 2. Prepare an analysis of variances for the third quarter of 2014 along the lines of Exhibit 7-2; identify the sales volume and flexible budget variances for operating income. 3. Compute the professional labor price and efficiency variances for the third quarter of 2014. 4. What factors would you consider in evaluating the effectiveness of professional labor in the third quarter of 2014.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using a flexible budgeting approach how do I prepare a performance report for the current department for September 2016, comparing actual overhead cost with budgeted overhead cost for 5700 hours. Separate overhead costs into variable and fix components and show the amounts of any variances between actual and budget in amounts.
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As part of her annual review of her company’s budgets versus actuals, Mary Gerard isolates unfavorable variances with the hope of getting a better understanding of what caused them and how to avoid them next year. The variable overhead efficiency variance was the most unfavorable over the previous year, which Gerard will specifically be able to trace to: a. Actual overhead costs below applied overhead costs. b. Actual production units below budgeted production units. c. Standard direct labor hours below actual direct labor hours. d. The standard variable overhead rate below the actual variable overhead rate.
Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,300 pounds of oysters in August. The company's flexible budget for August appears below: Quilcene Oysteria Flexible Budget Actual pounds (q) Revenue ($4.15q) Expenses: Packing supplies ($0.35q) Oyster bed maintenance ($3,100) Wages and salaries ($2,500 + $0.35q) Shipping ($0.60q) Utilities ($1,210) For the Month Ended August 31 Other ($400 + $0.019) Total expenses Net operating income Actual pounds Revenue The actual results for August were as follows: Expenses: Quilcene Oysteria Income Statement For the Month Ended August 31 Packing supplies Oyster bed maintenance Wages and salaries Shipping Utilities Other Total expenses Net operating income 7,300 $ 30,295 2,555 3,100 5,055 4,380 1,210 473 16,773 $ 13,522 7,300 $ 26,600 2,725 2,960 5,465 4,110 1,020 1,093 17,373 $ 9,227
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