SOLUTION: DTCC Wyckam Manufacturing Inc Planning Budget Worksheet

Wyckam Manufacturing Inc. has provided the following estimates concerning its manufacturing
costs:
Fixed Cost
Cost per
per Month Machine-Hour
Direct materials
$
5.40
Direct labor
$ 43,000
Supplies
$
0.10
Utilities
$
1,800
$
0.25
Depreciation
$ 15,100
Insurance
$ 11,700
For example, utilities should be $1,800 per month plus $0.25 per machine-hour. The company
expects to work 4,200 machine-hours in June. Note that the company’s direct labor is a fixed
cost.
Required: Prepare the company’s planning budget for June.
AirQual Test Corporation provides on-site air quality testing services. The company has
provided the following cost formulas and actual results for the month of February:
Fixed
Component
per Month
Revenue
Technician wages
Mobile lab operating
expenses
Office expenses
Advertising expenses
Insurance
Miscellaneous expenses
Actual
Variable
Total
Component per
for
Job
February
$
279
$ 39,100
$
8,050
$
8,200
$
4,700
$
33
$
9,490
$
$
$
$
2,800
1,600
2,890
920
$
3
$
2
$
$
$
$
3,100
1,670
2,890
525
The company uses the number of jobs as its measure of activity. For example, mobile lab
operating expenses should be $4,700 plus $33 per job, and the actual mobile lab operating
expenses for February were $9,490. The company expected to work 150 jobs in February, but
actually worked 154 jobs.
Required: Prepare a flexible budget performance report showing AirQual Test Corporation’s
revenue and spending variances and activity variances for February. (Indicate the effect of each
variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect
(i.e., zero variance). Input all amounts as positive values.)
TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and
manager has been attempting to evaluate performance and control costs using a variance report
that compares the planning budget to actual results. A recent variance report appears below:
Lessons
TipTop Flight School
Variance Report
For the Month Ended July 31
Actual Planning
Results Budget Variances
165
160
Revenue
$40,930 $40,000 $
Expenses:
Instructor wages
11,330 11,200
Aircraft depreciation
5,610
5,440
Fuel
2,450
1,920
Maintenance
2,090
1,960
Ground facility expenses 1,915
1,940
Administration
3,635
3,720
Total expense
27,030 26,180
Net operating income
$13,900 $13,820 $
930 F
130
170
530
130
25
85
850
80
U
U
U
U
F
F
U
F
After several months of using these reports, the owner has become frustrated. For example, she is
quite confident that instructor wages were very tightly controlled in July, but the report shows an
unfavorable variance.
The planning budget was developed using the following formulas, where q is the number of
lessons sold:
Cost Formulas
Revenue
$250q
Instructor wages
$70q
Aircraft depreciation
$34q
Fuel
$12q
Maintenance
$520 + $9q
Ground facility expenses$1,300 + $4q
Administration
$3,240 + $3q
Required:
1. Complete the flexible budget performance report for the school for July. (Indicate the effect
of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no
effect (i.e., zero variance). Input all amounts as positive values.)

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