ABC Manufacturing Company produces widgets and has been operating for several years. The company's management team is responsible for preparing and monitoring the company's budget to ensure that it stays on track and achieves its financial objectives. ABC Manufacturing Company has recently completed its fiscal year. Management has compiled the planning budget and actual results for the year and has found that the company's actual performance fell short of its budgeted expectations. Management wants your help in gleaning extra information from what we have. The budget and actual results are as follows: Planning budget Sales revenue $5,000 Direct materials 1,000 Direct labor 1,500 Manufacturing overhead 750 Selling and administrative expenses 1,500 Profit $250 Actual results Sales revenue $4,500 Direct materials 1,200 Direct labor 1,100 Manufacturing overhead 900 Selling and administrative expenses 1,600 Profit ($750) The company budget was based on selling 100 units, but they only sold 80. Please calculate the activity and revenue/spending variances, and discuss how the company did overall. The Omelet House is a popular breakfast restaurant that has been serving high-quality omelets to its customers for the past 20 years. The restaurant's owner recently conducted a budget review and found some surprising results. Specifically, the owner noticed egg costs had risen dramatically, but was very disappointed in the manager’s decisions which led to decreased revenue (the budget called for 1,000 customers, but only 700 were served). Please critically evaluate the manager’s decision-making skills and decide whether he should be fired. Planning budget Sales revenue $10,000 Direct materials 3,000 Fixed Costs 5,000 Profit $2,000 Actual results Sales revenue $9,100 Direct materials 7,000 Fixed Costs 5,000 Profit ($2,900)
ABC Manufacturing Company produces widgets and has been operating for several years. The company's management team is responsible for preparing and monitoring the company's budget to ensure that it stays on track and achieves its financial objectives. ABC Manufacturing Company has recently completed its fiscal year. Management has compiled the planning budget and actual results for the year and has found that the company's actual performance fell short of its budgeted expectations.
Management wants your help in gleaning extra information from what we have. The budget and actual results are as follows:
|
Planning budget |
|
|
Sales revenue |
$5,000 |
|
Direct materials |
1,000 |
|
Direct labor |
1,500 |
|
Manufacturing overhead |
750 |
|
Selling and administrative expenses |
1,500 |
|
|
|
|
Profit |
$250 |
|
Actual results |
|
|
Sales revenue |
$4,500 |
|
Direct materials |
1,200 |
|
Direct labor |
1,100 |
|
Manufacturing overhead |
900 |
|
Selling and administrative expenses |
1,600 |
|
|
|
|
Profit |
($750) |
The company budget was based on selling 100 units, but they only sold 80. Please calculate the activity and revenue/spending variances, and discuss how the company did overall.
The Omelet House is a popular breakfast restaurant that has been serving high-quality omelets to its customers for the past 20 years. The restaurant's owner recently conducted a budget review and found some surprising results. Specifically, the owner noticed egg costs had risen dramatically, but was very disappointed in the manager’s decisions which led to decreased revenue (the budget called for 1,000 customers, but only 700 were served). Please critically evaluate the manager’s decision-making skills and decide whether he should be fired.
|
Planning budget |
|
|
Sales revenue |
$10,000 |
|
Direct materials |
3,000 |
|
Fixed Costs |
5,000 |
|
|
|
|
Profit |
$2,000 |
|
Actual results |
|
|
Sales revenue |
$9,100 |
|
Direct materials |
7,000 |
|
Fixed Costs |
5,000 |
|
|
|
|
Profit |
($2,900) |
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