Velora: Growth Without the Expected Profit — سؤال دراسة حالة في المحاسب الإداري المعتمد

The case

Velora Modular Shelving adopted the following annual master budget for a single standardized shelving unit. The quantities and rates were carried forward from the prior year's actual results because management expected a stable year.

Master-budget item	Amount
Unit sales	60,000
Selling price per unit	$240
Variable operating cost per unit sold	$90
Total fixed operating costs	$6,000,000

Actual sales were 66,000 units, the actual selling price was $240 and actual variable cost remained $90 per unit sold. Actual operating income was $2,100,000. Management wants to distinguish the benefit of higher sales volume from other cost performance before setting the next budget.

Assumptions

There is one product and no sales-mix change. Production equals sales, so there is no inventory-related profit effect.
All actual and budgeted activity remains within the same relevant range. Flexible-budget fixed cost is $6,000,000.
There are no selling-price or variable-cost variances; any operating-income shortfall against the flexible budget is attributable to fixed operating costs.
For the numeric income variance, use actual operating income minus flexible-budget operating income: negative is unfavorable.

What is the main analytical advantage of comparing Velora's actual results with a flexible budget for 66,000 units?

Answer It holds all costs, including variable costs, at their master-budget totals so that spending discipline is preserved. It changes every budgeted fixed cost in direct proportion to units sold. It evaluates managers against the original 60,000-unit plan so that targets cannot be changed after the fact. It compares performance at the same activity level, separating volume effects from other differences.

Velora is considering a zero-based review of discretionary support spending next year. Which instruction would best reflect that approach?

Answer Prepare and rank decision packages that justify proposed activities and funding without assuming last year's approval guarantees renewal. Add inflation to every prior-year line and approve the result automatically. Reduce every support line by the same percentage so that total spending falls below last year's level. Use actual sales volume to restate variable costs after the year ends.

Select THREE findings that could explain part of Velora's adverse operating-income difference against the flexible budget without contradicting the stated price, volume and variable-cost facts.

Select 3 answers. Selected 0 / 3

Answer Actual unit sales fell below the 60,000-unit master budget. An unbudgeted fixed warehouse lease expense was recognized during the year. Fixed depreciation was lower than budgeted because a planned equipment purchase was deferred. An unbudgeted litigation charge was included in fixed operating costs. A fixed annual management-retention award exceeded the amount budgeted.

Calculate Velora's operating-income variance as ACTUAL operating income minus FLEXIBLE-BUDGET operating income at 66,000 units. Enter whole US dollars using a negative number for an unfavorable variance and a positive number for a favorable variance; no rounding is necessary.

Answer USD

A whole number. A negative amount may be written with a minus sign or in brackets.

Velora's master budget used Master-budget activity units. Carrying forward the prior year's results produced an Budget preparation approach budget process. The flexible budget evaluates the year using Flexible-budget activity while retaining the planned unit rates and cost behavior.

Velora's worksheet requires five sequential approvals, and each step may use only amounts or classifications approved in an earlier step. Arrange the actions in the required order.

Dragging, or the arrow buttons, to reorder.

Calculate flexible operating income after both variable and fixed costs are approved.
Using the approved cost-behavior classification, validate the 66,000-unit actual activity measure as the driver for the variable items.
Apply budgeted selling price and variable cost per unit to the validated activity.
Identify budgeted variable rates and costs fixed within the relevant range.
Bring the approved $6,000,000 fixed-cost budget into the completed revenue and variable-cost schedule.

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