Activity-Based Flexible Budgeting Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: • Four welding units, with a lease cost of $15,000 per year per unit • Six welding employees each paid a salary of $58,000 per year (A total of 12,000 welding hours are supplied by the six workers.) • Welding supplies: $400 per job • Welding hours: 4 hours used per job During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs. • Lease cost: $60,000 • Salaries: $365,400 • Parts and supplies: $1,134,200 Required: 1. Prepare a flexible budget formula for the welding activity using welding hours as the driver. Welding cost = $fill in the blank e95687f99006fa4_1 + $fill in the blank e95687f99006fa4_2 X 2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based Performance Report, if variance amount is unfavorable select "U" , select "F", if it is Favorable and select "NA" if there is no variance. Foy Company Activity-Based Performance Report Activity Actual Cost Budgeted Cost (95% level) Budget Variance Variance Welding: Fixed cost $fill in the blank a4aea3fd4fda032_1 $fill in the blank a4aea3fd4fda032_2 $fill in the blank a4aea3fd4fda032_3 Variable cost fill in the blank a4aea3fd4fda032_5 fill in the blank a4aea3fd4fda032_6 fill in the blank a4aea3fd4fda032_7 3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case. Welding cost = $fill in the blank 914756009074fc7_1 + $fill in the blank 914756009074fc7_2 X

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Activity-Based Flexible Budgeting

Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:

• Four welding units, with a lease cost of $15,000 per year per unit

• Six welding employees each paid a salary of $58,000 per year (A total of 12,000 welding hours are supplied by the six workers.)

• Welding supplies: $400 per job

• Welding hours: 4 hours used per job

During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs.

• Lease cost: $60,000

• Salaries: $365,400

• Parts and supplies: $1,134,200

Required:

1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.

Welding cost

$fill in the blank e95687f99006fa4_1

$fill in the blank e95687f99006fa4_2 X

2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based Performance Report, if variance amount is unfavorable select "U" , select "F", if it is Favorable and select "NA" if there is no variance.


Foy Company
Activity-Based Performance Report
Activity	Actual Cost	Budgeted Cost (95% level)	Budget Variance	Variance
Welding:
Fixed cost	$fill in the blank a4aea3fd4fda032_1	$fill in the blank a4aea3fd4fda032_2	$fill in the blank a4aea3fd4fda032_3
Variable cost	fill in the blank a4aea3fd4fda032_5	fill in the blank a4aea3fd4fda032_6	fill in the blank a4aea3fd4fda032_7

3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case.

Welding cost

$fill in the blank 914756009074fc7_1

$fill in the blank 914756009074fc7_2 X

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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