Boyne University offers an extensive continuing education program in many cities throughout the...

Question:

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool?s monthly planning budget is based on operating 20 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

Boyne University Motor Pool
Cost Control Report
For the Month Ended March 31
March Actual Planning Budget (Over) Under Budget
Miles 63,000 50,000
Autos 21 20
Gasoline $ 9,350 $ 7,500 $(1,850)
Oil, minor repairs, parts 2,360 2,000 (360)
Outside repairs 1,420 1,500 80
Insurance 2,120 2,000 (120)
Salaries and benefits 7,540 7,540 0
Vehicle depreciation 5,250 5,000 (250)
Total $28,040 $25,540 $(2,500)

The planning budget was based on the following assumptions:

$0.15 per mile for gasoline. $0.04 per mile for oil, minor repairs, and parts. $75 per automobile per month for outside repairs. $100 per automobile per month for insurance. $7,540 per month for salaries and benefits. $250 per automobile per month for depreciation.

The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool's performance.

Required:

Prepare a new performance report for March based on a flexible budget that shows spending variances.

What are the deficiencies in the original cost control report? How does the report that you prepared in part (1) above overcome these deficiencies?

Managerial Accounting:

Managerial accounting relates to the calculation of flexible budgeting analysis and the preparation of budget performance report, which is the comparison of the actual and planned budget.

Answer and Explanation:

Prepare a new performance report for March based on a flexible budget that shows spending variances.

BOYNE UNIVERSITY MOTOR POOL

FLEXIBLE BUDGET REPORT

For the Month Ended March 31

Actual Spending variance Variance Flexible Budget
Miles 63,000 - -
Autos 21
Gasoline 9,350 -100 F 9,450
Oil, minor repairs, parts 2,360 -160 F 2,520
Outside repairs 1,420 -155 F 1,575
Insurance 2,120 20 UF 2,100
Salaries and benefits 7,540 0 7,540
Vehicle depreciation 5,250 250 UF 5,000
Total 28,040 -145 F 28,185

Computations:

9,350+2,360+1,420+2,120+7,540+5,250=28,040

0.15*63,000=9,450

0.04*63,000=2,520

75*21=1,575

100*21=2,100

What are the deficiencies in the original cost control report? How does the report that you prepared in part (1) above overcome these deficiencies?

Answer: The original cost control report compared to the actual cost versus the original budget was estimated using 50,000 miles and 20 autos capacity. The report based on the flexible budget considers actual capacity at a budget cost per unit.


Learn more about this topic:

Loading...
Managerial Accounting Functions

from Business Management: Help & Review

Chapter 9 / Lesson 1
12K

Related to this Question

Explore our homework questions and answers library