Chartered Professional Accountants of Canada, CPA Canada, CPA are trademarks and/or certification marks of the Chartered Professional Accountants of Canada. © 2019 , Chartered Professional Accountants of Canada. All Rights Reserved. Les désignations « Comptables professionnels agréés du Canada », « CPA Canada » et « CPA » sont des marques de commerce ou de certification de Comptables professionnels agréés du Canada. © 2019 Comptables professionnels agréés du Canada. Tous droits réservés. 30/10/18 Core 2 — Week 5 Integrated Problem Solution The following solution is a “best” response, demonstrating a level much higher than competent. However, there may be additional acceptable and reasonable points that are not reflected in this response. In addition, candidates are not expected to prepare a response of this level given the time constraints involved and, if applicable, the page limits/word counts provided. Memo To: Controller From: Assistant Controller, CPA Subject : Requested budget information Assessment Opportunity #1 The candidate prepares monthly sales and production budgets . The candidate demonstrates competence in Management Accounting. CPA Map Competencies: 3.2.1 Develops or evaluates data and information inputs for operational plans, budgets, and forecasts (Core – Level A) 3.2.2 Prepares, analyzes, or evaluates operational plans, budgets, and forecasts (Core – Level A) A sales budget has been prepared in Exhibit I . Budgeted unit sales for 20X3 are 1,480 units , and budgeted annual sales revenue is expected to be $1,864 ,800. The production budget has been prepared in Exhibit II. Annual production is budgeted at 1, 493 units. Core 2 — Week 5 Integrated Problem Solution Assessment Opportunity #2 The candidate prepares the cost of goods sol d budget , the selling and administrative expense budgets, and the annual budgeted net income statement . The candidate demonstrates competence in Management Accounting. CPA Map Competencies: 3.2.1 Develops or evaluates data and information inputs for operational plans, budgets, and forecasts (Core – Level A) 3.2.2 Prepares, analyzes, or evaluates operational plans, budgets, and forecasts (Core – Level A) The cost of goods sold budget has been prepared in Exhibit III. The annual cost of goods sold budgeted is $1,183,476. The selling and administrative expense budget has been prepared in Exhibit IV. Total budgeted variable expenses are $74,000, and total budgeted fixed expenses are $515,061. The budgeted income statement is in Exhibit V ; net income before tax is expected to be $92,263. Assessment Opportunity # 3 The candidate calculates the flexible budget , performs the rate and efficiency vari ances for direct material and direct labour , and interprets the results . The candidate demonstrates competence in M anagement Accounting. CPA Map Competencies: 3.2.1 Develops or evaluates data and information inputs for operational plans, budgets, and forecasts (Core – Level A) 3.2.2 Prepares, analyzes, or evaluates operational plans, budgets, and forecasts (Core – Level A) 3.2.3 Computes, analyzes, or assesses implications of variances (Core – Level A) As shown in Exhibit VI , there is a large flexible budget variance for aluminum . The variance is the result of a large rate variance. This tells us that what was paid for the materials does not reflect what we had budgeted. The efficiency variance tells us that we used a comparable amount of material to what was budgeted. Therefore, we should investigate why the cost of the material has increased so much and if there are ways we can reduce the cost by changing suppliers or entering into fixed pricing contracts to reduce our risk. Overall, there is not a large flexible budget variance for direct labour ; however , there is a discrepancy between what we budgeted for the rate (less than budgeted) and number
