zal Expenditures Budget anuary 1, 20Y6, the controller of Omicron Inc. is planning capital expenditures for the years 20Y6-20Y9. The following inte croller collect the necessary information for the capital expenditures budget: ector of Facilities: A construction contract was signed in late 20Y5 for the construction of a new factory building at a contract construction is scheduled to begin in 20Y6 and be completed in 20Y9. e President of Manufacturing: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in lates ditional $200,000 will be needed early in the following year (20Y8) to test and install the equipment before we can begin prod grow, I expect we'll need to invest another $1,000,000 in equipment in 20Y9. ief Operating Officer: We have really been growing lately. I wouldn't be surprised if we need to expand the size of our new fact least 35%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, ost of the expansion to be proportional to the size of the expansion. irector of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make se fter the new factory building is completed and producing product. During 20Y8, once the factory is up and running, we should equ ith wireless technology. I think it would cost us $800,000 today to install the technology. However, prices have been dropping by should be less expensive at a later date.
zal Expenditures Budget anuary 1, 20Y6, the controller of Omicron Inc. is planning capital expenditures for the years 20Y6-20Y9. The following inte croller collect the necessary information for the capital expenditures budget: ector of Facilities: A construction contract was signed in late 20Y5 for the construction of a new factory building at a contract construction is scheduled to begin in 20Y6 and be completed in 20Y9. e President of Manufacturing: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in lates ditional $200,000 will be needed early in the following year (20Y8) to test and install the equipment before we can begin prod grow, I expect we'll need to invest another $1,000,000 in equipment in 20Y9. ief Operating Officer: We have really been growing lately. I wouldn't be surprised if we need to expand the size of our new fact least 35%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, ost of the expansion to be proportional to the size of the expansion. irector of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make se fter the new factory building is completed and producing product. During 20Y8, once the factory is up and running, we should equ ith wireless technology. I think it would cost us $800,000 today to install the technology. However, prices have been dropping by should be less expensive at a later date.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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