Hartley Company maufactures book bags and has provided the following information

Question

Hartley Company maufactures book bags and has provided the following information for June 2016 EE (Click the icon to view the information.) Requirements 1. Prepare a flexible budget performance report. (Hint: You will need to calculate the flexible budget amounts for 9,000 units.) 2. As the company owner, which employees would you praise or criticize after you analyze this performance report? Requirement 1. Prepare a flexible budget performance report. (Hint You will need to calculate the flexible budget amounts for 9,000 units.) (Enter a "O" for any zero balances. For any $0 variances, leave the Favorable (F)/Unfavorable (U) input blank. Enter all amounts as positive values.) Hartley Company Flexible Budget Performance Report For the Month Ended June 31, 2016 Budget Amounts Per Unit Flexible Budget Variance Sales Volume Variance Actual Flexible Static Actual Results Static Budget Results Budget Budget 10,000 170,000 60,000 110,000 17.000 93,000 9,000 157,000 $ 55.400 Units Sales Revenue Variable Expenses Contribution Margin Fixed Expenses Operating Income Units Sales Revenue Variable Expenses Contribution Margin Fixed Expenses Operating Income 101,600 16.000 85,600 $ Requirement 2. As the company owner, which employees would you praise or criticize after you analyze this performance report? 0 A. The flexible budget variance for fixed costs is most likely due to a change in a cost such as insurance premiums. Since the production department is O B. The sales volume variance for fixed costs most likely is a result of delaying a scheduled overhaul of equipment that altered the fixed expenses in the short responsible for fixed costs, the manager of that department would be praised if the variance is unfavorable or criticized if the variance is favorable term but will increase the company's costs in the long run. Since the engineering department is responsible for fixed costs, the manager of that department would be praised if the variance is unfavorable or criticized if thevaiance is favorable The sales volume variance for operating income could be due to the effectiveness of the sales staff, or it could be due to a long period of snow that made it difficult for employees to get to work, bringing work to a standstill. To encourage sales, the sales staff should be praised and to encourage higher production levels, the manager of the production department should be criticized. More information is needed to determine which employees to praise or criticize. As the company owner, you should determine the causes of the variances before praising or criticizing employees. It is especially important to determine whether the variance is due to factors the managers can control. Wise managers use variances to raise questions and direct attention, not to fix blame ° C. O D.

Explanation / Answer

2

1-3

4

3-5

85600-82000

3600 F

82000-93000

11000 U

85600-93000

7400 U

2)

Correct option is "C"

since the actual result as compare to standard result is favorable therefore sales efforts should be recognised whereas due to less production ,production department should be criticized.

1

2

1-3

3

4

3-5

5 Budgeted amount per unit Actual results Flexible budget variance Flexible budget sales volume variance static budget Units 9000 9000 10000 sales revenue 170000/10000=17 157000 4000 F 17*9000= 153000 17000 U 170000 variable expense 60000/10000=6 55400 1400 U 6*9000=54000 6000 F 60000 contribution margin 101600 2600 F 99000 11000 U 110000 fixed cost 16000 1000 F 17000 0 NA 17000 operating income 85600 3600 F 82000 11000 U 93000

85600-82000

3600 F

82000-93000

11000 U

85600-93000

7400 U

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