1. Is this new report misleading? Explain. What additional information is needed
ID: 2448961 • Letter: 1
Question
1. Is this new report misleading? Explain. What additional information is needed to make the report useful?
2. What selling price did Midwest plan for October?
3. Write the profit function was used in constructing the budget.
4. Create Midwest’s flexible budget.
5. Determine the amount by which Midwest’s net income changed simply because its sales level changed.
6. Compute Midwest’s activity variance. How is this variance related to your answer to question 5?
Midwest Crafts is a manufacturer of high quality ood tables sold throughout the Midwest. At the g of the year, its m d monthly budgets. It reported the following information for October. Difference Revenue Cost Profit Budget $1,800,000 1,295,000 $505,000 100.00% 71.94% 28.06% Aciucal $2,100,000 1,483,000 $617,000 100.00% 70.62% 22.38% $300,000 188,000 s112000 16.67% 14.52% 22.18% Management is delighted to see that profits were more than 22% over budget. Because they had experienced a stock-out, they knew that sales were strong and expected profit to be higher than budgeted. But, they did not expect the good news about costs. From the budget they can see that revenues rose faster than costs and, in fact, cost as a percentage of sales is smaller than what the budget had called for. Because this is such tremendous performance, they are planning to award employees a 5% payroll bonus.Explanation / Answer
yes report is misleading, as intern calculated variances directly by totalcosts, but variances should be calculated properly by using prices per unit of standard and actual and also actual and standard units, like we must know how much mateial required to produce a product, hoe many labour required to produce a single unit. So, all these aforesaid information is required realted to every cost in order to have an effective report and correct report.
anser 2
selling price => 2100000 /3000 => $700 per unit.
answer 3
profit function used in construting the budget is => total cost including fised and variable is subtracted from revenue in order to get profit.
answer 4 can not be answered as at what level flexible budget requires not given.
answer 5
net income changed due to change in sales => $112000
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