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Managmenet Accounting 2 Assignment 1

1612 words - 7 pages

Question 1 (10 marks)
Vaughan Speed Clean — budgeting
The Vaughan Speed Clean company is a young company that operates three car wash locations in the Greater Toronto Area. The owner relies on the abilities of three managers to run the car wash locations. At the end of each quarter, the owner evaluates the performance of each car wash location. His evaluations determine the size of the location manager’s bonus. If the location achieves an annual ROA1 of 10%, the location manager gets $1,000 for the quarter. The bonus is also augmented by $1 for every $10 the location exceeds its profit target.
However, the bonus contract gives the owner the right to make subjective adjustments for the ...view middle of the document...

Exhibit 1: Profit compared to budget for Jane-HW7 — Last quarter 2013
  | Budget1 | Actual | Variance |
  |   |   |   |
Revenue | $184,000 | $120,555 | $63,445 U |
Variable expenses, including wages
    (50% of revenues) | 92,000 | 60,277 | 31,723 F |
Fixed expenses | 53,820 | 55,000 | 1,180 U |
Total expenses | 145,820 | 115,277 | 30,543 F |
Profit | $  38,180 | $   5,278 | $32,902 U |
1Based on 800 hours of good weather
Exhibit 2: Operating statistics for Jane-HW7 — Last quarter 2013
  | Budgeted | Actual |
  |   |   |
Average number of vehicles washed in a good weather hour | 23 | 27 |
Average revenue per vehicle | $10 | $9.50 |
Total hours in quarter | 920 | 920 |
Hours of bad weather | 120 | 450 |
Hours of good weather | 800 | 470 |
a. How large will the bonus be for the Jane-HW7 manager for the last quarter of 2013? (4 marks)
b. Was the Jane-HW7 location properly managed in the last quarter? Your answer should consist of variance calculations (based on information provided in Exhibit 2) and an assessment of which variances are controllable. (6 marks)

1 Return on assets (ROA) is the measure of profit earned before interest expense in relation to the assets employed by an entity. It is calculated by expressing net income as a percentage of average total assets. The term is similar to return on investment.
Question 2 (8 marks)
RevGenR Seats Incorporated — variance analysis  
RevGenR Seats Incorporated manufactures golf cart seats and mobility vehicle seats. Here are the 2013 budget and actual sales and market data for the company’s two seat products:
  | Golf cart | Mobility vehicle |
Actual data |   |   |
Company sales — units | 5,940   | 16,060   |
Selling price per unit | $200   | $300   |
Total industry sales of both products: 160,000 units |   |   |

Budget data |   |   |
Expected company sales — units | 4,788   | 18,012   |
Expected selling price per unit | $220   | $300   |
Unit manufacturing cost at expected sales per unit | $120* | $200* |
Unit selling and administrative expense
   at expected sales per unit | $70* | $80* |
Contribution margin per unit | $134   | $164   |
Total expected industry sales of both products:  123,000 units |   |   |
*Fixed and variable |   |   |
a. Calculate the following revenue variances for 2013: (3 marks)
i. Sales mix
ii. Sales quantity
b. State two reasons why, as president of RevGenR Seats Incorporated, you will or will not be satisfied with the performance of the marketing and sales personnel, by referring to the calculations from part (a). (3 marks)
c. Calculate the market share and market size variances for 2013. (2 marks)
Question 3 (13 marks)
Hardware Scientific Technology Inc. — transfer pricing
Hardware Scientific Technology Inc. operates and fully supports a decentralized corporate structure. The Assembly subsidiary manufactures automotive computer engine modules...

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