Question

Peter McQueen has run Best Value Car Detailing for the past 10 years. His static budget and actual results for June 2014 are provided below. Peter has one employe employee 2 hours to detail a vehicle, regardless of his or her experience. Peter pays his experienced employee $30 per vehicle and the other two employees $15 per E: (Click the icon to view the actual and budgeted income statements.) Read the requirements Requirement 1. How many cars, on average, did Peter budget for each employee? How many cars did each employee actually detail? Determine the formula to show how many cars, on average, the employees detailed. (X = number of cars detailed by experienced employee, Y = number of cars deta (Click the icon for information regarding the formula selections.) (LEX X )+(LFX Y = LB Next, calculate the budgeted and actual number of cars for each employee type. Budgeted Actual number of cars number of cars Data Table - X Experienced employee Less experienced employees Requirement 2. Prepare a flexible budget for June 2014. (Round your answers to th Best Value Car Detailing Income Statement Variances For the month ended June 30, 2014 Best Value Car Detailing Actual and Budgeted Income Statements For the Month Ended June 30, 2014 Budget Actual Cars detailed 230 250 Revenue $ 34,500 $ 47,500 Flexible budget Budget Actual 230 250 $ 34,500 $ 47,500 Variable costs Costs of supplies Cars detailed 2,410 6,900 Labor 1,610 6,210 7,820 Revenue Variable costs Costs of supplies 9,310 1,610 6,210 7,820 Labor Total variable costs Contribution margin Fixed costs 2,410 6,900 9,310 26,680 9,700 16,980 $ 38,190 9,700 28,490 $ Total variable costs Contribution margin Operating income Fixed costs 26,680 9,700 16,980 $ 38,190 9,700 28,490 Print Done $ Operating income Requirement 3. Compute the sales price variance and the labor efficiency variance for each labor type. Begin with the sales price variance. Determine the formula then compute the sales price variance. Label the variance as favorable (F) or unfavorable (U).

Answer 1

Part 1

	Budgeted number of cars	Actual number of cars
Experienced employees	184	210
Less experienced employees	46	40

Budgeted

30X+15Y = 6210

30X+15(230-X) = 6210

30X+3450-15X = 6210

15X=2760

X =184

(30*184)+15Y=6210

5520+15Y = 6210

15Y =690

Y = 46

Actual

30X+15Y = 6900

30X+15(250-X) = 6900

30X+3750-15X = 6900

15X=3150

X =210

(30*210)+15Y=6900

6300+15Y = 6900

15Y =600

Y = 40

Part 2

	Budget	Actual	Flexible budget
Cars detailed	230	250	250
Revenue	34500	47500	37500
Variable costs
Costs of supplies	1610	2410	1750
Labor	6210	6900	6750
Total variable costs	7820	9310	8500
Contribution margin	26680	38190	29000
Fixed costs	9700	9700	9700
Operating income	16980	28490	19300

(34500/230)*250 =37500

(1610/230)*250 =1750

(6210/230)*250 =6750

Part 3

(	Actual sales price	-	Budgeted sales price	)	X	Actual # of cars detailed	=	Sales Price Variance
(	190	-	138	)	x	250	=	$13000	U

47500/250 =190

34500/250 =138

(

Actual # of cars detailed

-

Budgeted quantity of input allowed for actual output

)

X

Budgeted wage rate per car

=

Labor efficiency variance

	Labor efficiency variance
Experienced worker	$300 U
Less experienced workers	$300 F

Experienced worker = 30*(210-(184/230*250)) = 300

Less experience workers = 30*(40-(46/230*250)) = -300

Part 4

In addition to understanding the variances computed above, Peter should attempt to keep track on the number of cars worked on by each employee, as well as, the number of hours actually spent on each car.