Calculate the flexible-budget variance, calculate the price and efficiency variance for

Josh Sanchez is the chief financial officer of, an Internet company that enables customers to order deliveries of flowers by accessing it's Web site. Sanchez is concerned with the efficiency and effectiveness of the finance function. He collects the following information for three finance actives in 2004:

Rate per unit of Cost Driver

Activity Activity level cost Driver Static Budget Actual
Receivables Output unit Remittances $0.639 $0.75
Payables Batch Invoices 2.900 2.80
Travel expenses Batch Travel claims 7.600 7.40

The output measure is the number of deliveries, which is the same as the number of remittances. The Following is additional information:

Amounts Actual Amounts

Number of deliveries 1,000,000 948,000
Batch size in tems of deliveries:
Payables 5 4,468
Travel expenses 500 501,587

1. Calculate the flexible-budget variance for each activity in 2004
2. Calculate the price and efficiency variance for each activity in 2004

Josh, Sanchez, CFO of, engages The Hackett Group, a consulting firm specializing in benchmarking. He asks Hackett to provide benchmark data of the finance function at "word-class" retail companies ( both traditional retail and internet-based retail) Hackett;s cost benchmarks for's three finance activities are

Finance Activity "Worl-Class" Cost Performance

Payables $0.71 per invoice
Receivables $0.10 per remittance
Travel expenses $1.58 oer travel claim

1. What new insights might arise with the Hackett benchmark data using the amounts in Exercise 7-30?
2. Assume you are in charge of travel-claim processing. What concerns might you have with Sanchez using the Hackett benchmark of $1.58 over travel claim as the key to evaluate your performance next period?

© SolutionLibrary Inc. 9836dcf9d7