22.2. Lakeside has closed its books for the first half of the ✓ Solved
Calculate the variance and variance percentage of the data presented in Table 22.6. Prepare your annual budget by object code and month using the following guidance: (a) Salaries are $23,000 per month, and benefits total 15% of salaries each month. (b) General supplies are purchased at the beginning of each quarter and total $400 per quarter. (c) There are two service contracts. One is for your website’s host and development and is paid in two parts: $15,000 in December and $25,000 in June. The second contract is for data analysis by an outside vendor. Payment on this contract is due every January, for a total of $2,000. (d) The director of your department attends a national conference every October. Their training (which includes travel) budget is $3,000 for the conference. (e) This year, your department will be outfitted with new technology equipment, including PCs, laptops, a phone system, and a new server. The cost is expected to be $36,000, and the transition should happen in February.
Using the budget you prepared, what is the variance by object code and for the overall department? Prepare a brief variance analysis summary for the department director regarding the department’s budget-to-actual position after the end of November and December.
In January, Brookville’s legislative body approved a new program for your department. The costs of the program include $15,000 for contract services ($5,000 in each of April, May, and June) and another $5,000 for training in April. The budget adjustment approval is only for $17,000 of the $20,000 requested. Make these adjustments to your original budget.
Paper For Above Instructions
Brokville's financial management and budgeting process encompass a variety of metrics to ensure effective allocation and monitoring of resources. Central to this is the variance analysis, which facilitates comparison between budgeted amounts and actual figures, aiding in the identification of discrepancies. This paper explores the calculation of variances and provides an annual budget breakdown based on given guidelines.
Variance Calculation for Lakeside
The first element of the task is to compute the variance between the budgeted and actual expenditures for Lakeside. Variance is calculated using the formula:
Variance = Actual - Budgeted
Using the numbers provided in Table 22.6:
| Item | Budgeted | Actual | Variance | Variance % |
|---|---|---|---|---|
| Fees | 5,785 | 5,785 | 0 | 0% |
| Regular Pay | 132,360 | 115,000 | -17,360 | -13.1% |
| Benefits | 44,816 | 17,250 | -27,566 | -61.5% |
| Total Personnel | 177,176 | 132,250 | -44,926 | -25.4% |
| General Supplies | 1,095 | 780 | -315 | -28.8% |
| Service Contract | 2,798 | 15,000 | 12,202 | 436.6% |
| Training | 1 | 1,500 | 1,499 | 149900% |
| All Expenditures | 189,000 | 189,500 | 500 | 0.26% |
The variances reveal a mixed performance of the department relative to its fiscal targets. Notably, while personnel expenses were under budget, indicating possible staffing efficiencies or vacancies, the service contract costs far exceeded the expectations. This could prompt a review of the service contracts in place to ensure they align with departmental needs and fiscal limits.
Monthly Budget Overview
For the planned annual budget of $400,000, a monthly breakdown can be structured as follows:
| Month | Salaries | Benefits | General Supplies | Service Contracts | Training | Total Monthly Expenses |
|---|---|---|---|---|---|---|
| January | 23,000 | 3,450 | 0 | 0 | 0 | 26,450 |
| February | 23,000 | 3,450 | 0 | 0 | 36,000 | 62,450 |
| March | 23,000 | 3,450 | 0 | 0 | 0 | 26,450 |
| April | 23,000 | 3,450 | 400 | 5,000 | 1,500 | 33,350 |
| May | 23,000 | 3,450 | 400 | 5,000 | 0 | 31,850 |
| June | 23,000 | 3,450 | 0 | 25,000 | 0 | 51,450 |
| July - December | 138,000 | 20,700 | 1,840 | 2,000 | 3,000 | 165,540 |
Overall Department Evaluation
The evaluation of the department's performance after December indicates mixed outcomes. While certain areas, such as personnel costs, maintained a favorable stance, costs related to the service contracts require attentive management to avert budget excess. Future budget adjustments will reflect any new programs authorized by the legislative body, ensuring that appropriations align with current and expected departmental needs.
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