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Question 1 Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Puget Sound Divers Planning Budget For the Month Ended May 31 Budgeted diving-hours (q) 300 Revenue ($410.00q) $ 123,000 Expenses: Wages and salaries ($12,000 + $126.00q) 49,800 Supplies ($6.00q) 1,800 Equipment rental ($2,300 + $21.00q) 8,600 Insurance ($4,100) 4,100 Miscellaneous ($530 + $1.48q) 974 Total expense 65,274 Net operating income $ 57,726 Required: 1. During May, the company’s activity was actually 290 diving hours. Complete the following flexible budget for that level of activity.
• Question 2 Flight Café is a company that prepares inflight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below: Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) 27,000 Revenue ($4.30q) $ 116,100 Expenses: Raw materials ($2.00q) 54,000 Wages and salaries ($6,000 + $0.20q) 11,400 Utilities ($2,000 + $0.05q) 3,350 Facility rent ($3,400) 3,400 Insurance ($2,700) 2,700 Miscellaneous ($900 + $0.10q) 3,600 Total expense 78,450 Net operating income $ 37,650 In July, 28,000 meals were actually served. The company’s flexible budget for this level of activity appears below: Flight Café Flexible Budget For the Month Ended July 31 Budgeted meals (q) 28,000 Revenue ($4.30q) $ 120,400 Expenses: Raw materials ($2.00q) 56,000 Wages and salaries ($6,000 + $0.20q) 11,600 Utilities ($2,000 + $0.05q) 3,400 Facility rent ($3,400) 3,400 Insurance ($2,700) 2,700 Miscellaneous ($900 + $0.10q) 3,700 Total expense 80,800 Net operating income $ 39,600 Required: 1. Compute the company’s activity variances for July.
• Question 3 Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,900 pounds of oysters in August. The company’s flexible budget for August appears below: Quilcene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds (q) 7,900 Revenue ($4.20q) $ 33,180 Expenses: Packing supplies ($0.25q) 1,975 Oyster bed maintenance ($3,200) 3,200 Wages and salaries ($2,100 + $0.45q) 5,655 Shipping ($0.65q) 5,135 Utilities ($1,280) 1,280 Other ($460 + $0.01q) 539 Total expense 17,784 Net operating income $ 15,396 The actual results for August appear below: Quilcene Oysteria Income Statement For the Month Ended August 31 Actual pounds 7,900 Revenue $ 26,600 Expenses: Packing supplies 2,145 Oyster bed maintenance 3,060 Wages and salaries 6,065 Shipping 4,865 Utilities 1,090 Other 1,159 Total expense 18,384 Net operating income $ 8,216 Required: Compute the company’s revenue and spending variances for August.
• Question 4 Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division New South Queensland Wales Sales $969,000 $3,024,000 Average operating assets $510,000 $ 540,000 Net operating income $ 87,210 $ 181,440 Property, plant, and equipment (net) $267,000 $ 217,000 Required: 1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job?
• Question 5 In business, a budget is a method for putting a limit on spending. False True
• Question 6 A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period. True False
• Question 7 A balanced scorecard should not contain any performance measures concerning customer satisfaction since the extent to which customers are satisfied is beyond the control of any manager in the company. False True