ACC 562 Strayer University Budget Preparation and Variance Analysis Sheet he purpose of this assignment is to evaluate and prepare a budget. Resources: Ex

ACC 562 Strayer University Budget Preparation and Variance Analysis Sheet he purpose of this assignment is to evaluate and prepare a budget.

Resources: Excel File. Tutorials and links to Excel help files were provided during week one of our class.

Instructions:

1. Download the Excel file provided.

2. Read the instructions tab.

3. Complete the Budget and Variance Analysis tab.

4. Submit the completed Excel file.

General Instructions: Download the Excel file provided. Your responsibility is to, in part, prepare the 2020 budget using prior year data and the information included with the instructions tab.

1. Actual column: compute the break even in units and dollars. Compute the margin of safety.

2. Flexible Budget column: Complete the 2020 Flexible Budget column incorporated with the budget and variance analysis tab. The flexible budget includes several changes to the data. The changes are listed in the Excel file / Instructions Tab.

2a. Compute variances.

2b. Explain the variances.

2c. Compute the break even in units and dollars.

2d. Compute the margin of safety.

The format used is a variable costing income statement.

Excel: In order to minimize errors, improve accuracy, and increase efficiency use formulas in all cells. If you need assistance with Excel review the week one questions thread. Included therein are several options to help you advance your Excel skills such as, in part, formula overview, basic math skills, and Excel essential training (week one learning activities).

Video: In order to gain experience and insight please review the following video. It is a simple presentation and will help everyone develop a basic understanding of flexible budgets. The video was created by a third party. There are additional videos included with the Bing search as well.

Flexible Budget Example

Flexible Budget Guidance: For additional information regarding flexible budgets please review the following.

What is a flexible budget?

Based on the example, fixed expenses do not change with volume. Contrary, variable expenses change with volume. With respect to the case study the same principles apply. The only difference is that our variable expenses will change based on sales volume instead of machine hours.

Example:

Sales Volume 2,800

Feed cost per animal 2.75

Total feed cost = 2,800*2.75=7,700

Advertisement, Bedding and Specialty Food Expense: Advertisement is a fixed expense at the 2,800 volume level (column F). As a result, column F, row 22 is equal to -0-. However, the expense is considered a mixed cost (fixed and variable) with the flexible budget (column H). Bedding and specialty food does not apply to the actual results (column F). As a result, column F, rows 23 and 24 is equal to -0-. For further clarification my suggestion is to read the instructions tab.

Variance and Variance Explanation: A variance is the difference between two numbers. From a budget perspective we compare actual business results to our budget. Material deviations are analyzed to help us plan, in part, revenue projections, expense levels, cash flow, and to make informed business decisions.

Calculate the variance for all items listed on the spreadsheet (i.e. sales, all variable and fixed expenses, contribution margin, net income, and the break even computation).

Column J: Enter the difference between actual results and the budget.

Column L: Explain the difference. Instructions: Use Excel formulas in all applicable cells.
Actual Column
1 Column F, rows 50-56. Use the skills you learned from the week five project. Compute the break even point in units and
Flexible Budget Column
1 Prepare a flexible budget using estimated annual unit sales = 3,500. Enter volume in the Budget and Variance Analysis t
2 The company adopted the accrual method of accounting in 2019. The cumulative affect of change in accounting principl
3 The company purchased equipment equal to $20,000. Terms: 5 year loan with an interest rate equal to 4.8% and $5,00
Depreciation: Straight-line method, 5 year useful life, no residual value.
4 Increase the average animal fee by 1.75% for the first five months and 2.85% for the remaining seven months of the yea
5 The owner’s sister is stationed in Europe with the military and wants to open another location or help with animal trainin
She doesn’t know if this will occur nor is the owner definitively planning for this option.
6 The owner is evaluating regional competitors for a potential business acquisition. Approximately $5,000 will be invested
7 Excess cash was invested in an S&P 500 Index fund with estimated annual capital gain and dividend income equal to $11
8 The company sold grooming equipment for a $500 dollar gain. However, the equipment is not expected to be delivered
9 The company is diversifying into animal training and recorded unearned income in 2019 equal to $175,000 for cash adva
Earned income is estimated to be $125,000.
10 Increase the variable cost per unit (animal) by 2.75%. This applies to all variable cost categories (excluding advertising, b
11 The driver for bedding and specialty food is the number of non-traditional animals. The company expect 320 animals pe
12 The company plans to relocate the business. This may increase rent by $750.
13 The company uses a dated advertising program including the yellow pages and billboard signs. The company plans to red
The cost structure changes to a mixed cost and includes $1200 fixed plus variable costs. The variable cost is equal to .05
The company expects 1,550 views and 225 scheduled appointments.
14 Use the skills you learned from the week five project. Compute the break even point in units and dollars. Compute the m
15 Use formulas to compute variances and explain why the variances are positive or negative. Enter formulas in the Budget
t and Variance Analysis tab, column H, row 4. Enter all other data and calculations in the appropriate cells (column H).
ge in accounting principle, net of tax, equal to $35K was recorded with their GAAP based financial statements.
r help with animal training for the military after she transitions to civilian life. Estimated start-up costs are $25K.
o $175,000 for cash advances from the U.S. government. The company expects to train several animals for special operation forces in 202
ny expect 320 animals per year at an average cost of $1.75 per animal for bedding and $1.35 per animal for specialty food.
d dollars. Compute the margin of safety. Enter the information in the Budget and Variance Analysis tab, rows 50-56.
special operation forces in 2020.
2020 Annual Budget and Variance Analysis
Annual Sales Volume (units)
2800
Per
Unit
Sales
Investment Income
Gain – Sale of Equipment
Military training – special operations
39.5
Total Income
Less: Variable Expenses
Rewards
Feed
Veterinary Fees
Labor
Supplies
Contractors
Advertisement
Bedding
Specialty Food
Actual
110,600
110,600
0.07
2.75
3.75
1.25
1.80
0.90
196
7,700
10,500
3,500
5,040
2,520
Total Variable Expenses
29,456
Contribution Margin
81,144
Less: Fixed Expense
Lease
Depreciation
Interest & Penalties
Insurance
Acquisition
Rent
Advertisement
Repairs & Maintenance
Entertainment
SG&A
Utilities
Taxes
Total Fixed Expense
350
780
435
5,675
6,700
4,700
3,460
4,075
2,300
3,450
5,800
37,725
Enter sales volume in colu
Flexible
Budget
Variance
Net Income (Loss)
Break Even (Units)
Break Even (Dollars)
Margin of Safety (Dollars)
43,419
Enter sales volume in colum H, row 4.
Variance Explanation

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