Boyne University offers an extensive continuing education program in many cities
ID: 2536300 • Letter: B
Question
Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool’s monthly planning budget is based on operating 20 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.
The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.
Boyne University Motor Pool
Cost Control Report
For the Month Ended March 31
March
Actual
Planning
Budget
(Over) Under Budget
Miles
57,900
49,900
Autos
21
20
Gasoline
$
14,400
$
13,473
$
(927
)
Oil, minor repairs, parts
8,320
7,984
(336
)
Outside repairs
1,205
1,020
185
Insurance
1,840
1,720
(120
)
Salaries and benefits
8,610
8,610
0
Vehicle depreciation
4,431
4,220
(211
)
Total
$
38,806
$
37,027
$
(1,779
)
The planning budget was based on the following assumptions:
$0.27 per mile for gasoline.
$0.16 per mile for oil, minor repairs, and parts.
$51 per automobile per month for outside repairs.
$86 per automobile per month for insurance.
$8,610 per month for salaries and benefits.
$211 per automobile per month for depreciation.
The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool’s performance.
Required:
1. Complete the performance report for March based on a flexible budget that shows spending variances. (Round "per mile" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Please help with Planning Budget Assumptions, thank you.
Boyne University Motor Pool
Spending Variances
For the Month Ended March 31
Planning Budget Assumptions
Actual Results
Flexible Budget
Spending Variances
Miles
57,900
57,900
Autos
21
21
Gasoline
per mile
$14,400
$1,233
F
Oil, minor repairs, parts
per mile
8,320
944
F
Outside repairs
per automobile
1,205
134
U
Insurance
per automobile
1,840
34
U
Salaries and benefits
per month
8,610
0
None
Vehicle depreciation
per automobile
4,431
0
None
Total
$38,806
$0
$2,009
F
Boyne University Motor Pool
Cost Control Report
For the Month Ended March 31
March
Actual
Planning
Budget
(Over) Under Budget
Miles
57,900
49,900
Autos
21
20
Gasoline
$
14,400
$
13,473
$
(927
)
Oil, minor repairs, parts
8,320
7,984
(336
)
Outside repairs
1,205
1,020
185
Insurance
1,840
1,720
(120
)
Salaries and benefits
8,610
8,610
0
Vehicle depreciation
4,431
4,220
(211
)
Total
$
38,806
$
37,027
$
(1,779
)
Explanation / Answer
Solution:
Boyne University Motor Pool
Spending Variances
For the Month Ended March 31
Planning Budget Assumptions
Actual Results
Flexible Budget
Spending Variances
Miles
57,900
57,900
Autos
21
21
Gasoline
$0.27
per mile
$14,400
$15,633
(57900*$0.27)
$1,233
F
Oil, minor repairs, parts
$0.16
per mile
$8,320
$9,264
(57900*$0.16)
$944
F
Outside repairs
$51
per automobile
$1,205
$1,071
(21*51)
$134
U
Insurance
$86
per automobile
$1,840
$1,806
(21*86)
$34
U
Salaries and benefits
8610
per month
$8,610
$8,610
$0
None
Vehicle depreciation
211
per automobile
$4,431
$4,431
(211*21)
$0
None
Total
$38,806
$40,815
$2,009
F
Note – Flexible Budget is the budget prepared on the basis of actual activity level achieved at standard cost.
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Boyne University Motor Pool
Spending Variances
For the Month Ended March 31
Planning Budget Assumptions
Actual Results
Flexible Budget
Spending Variances
Miles
57,900
57,900
Autos
21
21
Gasoline
$0.27
per mile
$14,400
$15,633
(57900*$0.27)
$1,233
F
Oil, minor repairs, parts
$0.16
per mile
$8,320
$9,264
(57900*$0.16)
$944
F
Outside repairs
$51
per automobile
$1,205
$1,071
(21*51)
$134
U
Insurance
$86
per automobile
$1,840
$1,806
(21*86)
$34
U
Salaries and benefits
8610
per month
$8,610
$8,610
$0
None
Vehicle depreciation
211
per automobile
$4,431
$4,431
(211*21)
$0
None
Total
$38,806
$40,815
$2,009
F
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