Assignment 1

Assignment 1
Manangement accounting 2
(ACCT 5000)

Student name: Milly R. Sangha
Student #:822-684-502

Question 1 – Vaughan Speed clean – budgeting
a. The manager’s incentive is based on the target profit is calculated by comparing the flexible budget with actual profit and budget actual profit. Flexible budget Actual Variance
Revenue $108,100 (23 x $10 x 470) $120,555 $12,455 F
Variable Expense 54,050 60,277 6,227 U (50% of revenues)
Fixed expenses 53,870 55,000 1,180 U
Profit $230 $5,278 $5,048 F

The bonus of the location manager is based on the annual ROA. ROA is calculated as ($184,000/ $600,000)*800 hours = $245.

The actual profit meets the budgeted target of $230, therefore the manager of Jane-HW7 location is entitled to at least $1,000 bonus. The total bonus amount = $1,000 + ($5,278 - $230) /10 x $1 = $1,504.80 Budgeted Actual

Cars washed 18,400 12,690
Price per car wash $10 $9.50
Variable cost $5 $4.75
Contribution margin $5 $4.75

Static budget variance = Actual results x Static budget amount = (27 x 470 x $4.75) – (23 x 800 x $5) = $60,277.50 - $92,000 = $31, 722.50 U

Flexible budget variance = Actual sales in units x (actual CM – Budgeted CM)