Specifically, the following critical elements must be addressed: II. Prepare and Perform a) What are your fixed costs? Segregate them in the budget model. b) Determine how variable costs change as activity measures change. How can this information be applied? c) Create the budget model, ensuring fixed costs are hard coded into the model (variable costs are stated as a percentage of the relevant activity measures or as a cost per unit of activity measure). d) Add actual activity measures to the model. Make sure all information is added accurately. e) Add the flexible budget calculations to the budget model. Make sure all information is accurate. f) Compare the flexible budget to the actual expenses. What does this inform? Be sure to discuss the following variances: i. Static budget variance, including sales volume and flexible budget variances ii. Price and efficiency variances for direct materials and direct labor iii. Spending and efficiency variances for variable manufacturing overhead g) Determine the aspects of the budgeting process that are in need of improvement. Justify your response. h) Interpret what budget variances represent. Should all variances be investigated? Guidelines for Submission: Your paper must be submitted using the Student Workbook to present your budgets and variances and a 1–2 page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins to explain your findings
Milestone Two, Part I
Use Tables I through IV on the MDE Manufacturing Budget to complete your calculations.
Refer to Exhibit 7-2 on page 253 of the text
Budget Model From Flexible Budget Calculations Sheet
Actual Flexible Budget Variance Favorable/ Unfavorable Flexible Budget Sales Volume Variance Favorable/ Unfavorable Static Budget
Units Sold 47,000 47,000 -3,000 50,000
Revenues $991,700 $4,700 Favorable $987,000 ($63,000) Unfavorable $1,050,000
Variable Costs
DM-Plastic 248160 211500 225000
DM-Cedar 37741 35250 37500
Direct Manuf. Labor 332760 282000 300000
Variable Manuf. Overhead 2585 2820 3000
Total Variable Costs 621246 531570 565500
Fixed Manuf. Overhead 94500 95000 95000
Total Costs 715746 626570 660500
Gross Margin 275954 389500
Milestone Two, Part II
Use the variance supporting calculation tab to complete your calculations.
Price Variance Efficiency Variance
Direct Materials - Cedar -22560 -14100
Direct Materials - Plastic 1034 -3525
Direct Labor 5640 -56400
Spending Variance Efficiency Variance
Variable Manufacturing Overhead