Hi Good Morning, Greetings, Bruchard\'s Freight and Haulage Performance report b
ID: 373033 • Letter: H
Question
Hi Good Morning,
Greetings,
Bruchard's Freight and Haulage
Performance report based on the Revenue level of $ 90000
Actual
Static Budget
Variance
$
$
$
Revenue from Haulage
85,000
90,000
5,000U
Less Variable expenses
Fuel
10520
13000
150U
Vehicle maintenance
17500
18500
1000F
Drivers wages
9500
11500
200F
Other operating expenses
12800
21000
1350F
Total variable expenses
50320
64000
2700F
Contribution margin
34680
26000
2300U
Less Fixed expenses
Depreciation on vehicles
2700
2600
100U
Cleaning
900
800
100U
Supervisory salaries
8100
8000
100U
Other operating expenses
11600
9900
1700U
Total fixed expenses
23300
21300
2000U
Net profit
11380
4700
4300U
Bruchard's Freight and Haulage
Performance report based on the Revenue level of $ 100000
Actual
Static Budget
Variance
$
$
$
Revenue from Haulage
95,000
1,00,000
5,000
Less Variable expenses
Fuel
15520
16000
150
Vehicle maintenance
17500
18500
1000
Drivers wages
9500
11500
200
Other operating expenses
12800
21000
1350
Total variable expenses
55320
67000
2700
Contribution margin
39,680
33,000
2,300
Less Fixed expenses
Depreciation on vehicles
2700
2600
100
Cleaning
900
800
100
Supervisory salaries
8100
8000
100
Other operating expenses
11600
9900
1700
Total fixed expenses
23300
21300
2000
Net profit
16,380
11,700
4,300
Bruchard's Freight and Haulage
Performance report based on the Revenue level of $ 110000
Actual
Static Budget
Variance
$
$
$
Revenue from Haulage
1,05,000
1,10,000
5,000
Less Variable expenses
Fuel
20520
19000
150
Vehicle maintenance
17500
20500
1000
Drivers wages
9500
11500
200
Other operating expenses
17800
26000
1350
Total variable expenses
65320
77000
2700
Contribution margin
39,680
33,000
2,300
Less Fixed expenses
Depreciation on vehicles
2700
2600
100
Cleaning
900
800
100
Supervisory salaries
8100
8000
100
Other operating expenses
11600
9900
1700
Total fixed expenses
23300
21300
2000
Net profit
16,380
11,700
4,300
2. Flexible Budget Equation:
A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. The flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of activity.
Total budgeted Monthly overhead cost = (Budgeted variable – overhead cost per activity unit * total activity units) + Budgeted Fixed – Overhead cost per month.
3. Performance report with volume variances and flexible budget variances:
Actual
Budgeted
Variance
$
$
$
Units Produced
1,05,000
1,05,000
0
Direct Material Cost
15200
15100
150
U
Direct Labour
13500
13000
1000
Over head:
Variable
Supplies
16500
15200
9000
F
Power
12000
11500
2000
F
Fixed:
Supervision
18500
16500
2000
F
Depreciation
8000
11000
0
Rent
13000
16000
1000
U
Total
96700
98300
1600
F
4. Actual net project is achieved only 65% of budgeted profit. Why because, vehicle related expenses(Fuel, Vehicle maintenance, Drivers wages) are high and also other operating expenses under variable expenses high. Hence we need reduce this cost to increase company’s profit.
Bruchard's Freight and Haulage
Performance report based on the Revenue level of $ 90000
Actual
Static Budget
Variance
$
$
$
Revenue from Haulage
85,000
90,000
5,000U
Less Variable expenses
Fuel
10520
13000
150U
Vehicle maintenance
17500
18500
1000F
Drivers wages
9500
11500
200F
Other operating expenses
12800
21000
1350F
Total variable expenses
50320
64000
2700F
Contribution margin
34680
26000
2300U
Less Fixed expenses
Depreciation on vehicles
2700
2600
100U
Cleaning
900
800
100U
Supervisory salaries
8100
8000
100U
Other operating expenses
11600
9900
1700U
Total fixed expenses
23300
21300
2000U
Net profit
11380
4700
4300U
Explanation / Answer
Question 1 Burchard's Freight and Haulage is a small trucking company in northern New South Wales. Basic bookkeeping tasks have previously been performed by a person with minimal training. Because of the growth of the business you have recently been appointed as accountant. The company's manager, Bob Burchard, has prepared the following performance report for May Burchard's Freight and Haulage Performance report for the month ending 31 May Actual Static Budget Variance Revenue from haulage less Variable expenses Fuel Vehicle maintenance Drivers' wages Other operating expenses Total variable expenses 105 000 110 000 5 000 U 15 950 22 000 12 300 23 350 73 600 31 400 15 700 23 500 12 500 25 200 76 900 33 100 250 U 1 500 F 200 F 1850 F 3 300 F 1 700 U Contrlbution margin less Fixed expenses Depreciation on vehicles Cleaning Supervisory salaries Other operating expenses Total fxed expenses Net profit 2 700 900 8 100 11 600 2 600 8 000 9 900 21 300 11 800 100 U 100 U 100 U 1 700 U 2 000 U 3 700 U 23 300 8 100 Required 1. Prepare a columnar flexible budget for Burchard's Freight and Haulage based on revenue levels of $90 000, $100 000 and $110 000 2. What is the flexible budget equation? 3. Prepare a detailed performance report which will show activity volume variances and flexible budget variances, item by item. 4. Although there are a number of favourable variances in Bob Burchard's report, actual net profit is only about 65% of budgeted net profit. Explain why this is so.