The Squeaky Horn Case Solution

Case Solution

This case provides students the chance to rehearse variance analysis to have an annual operating plan using flexible budgeting abilities. First, a static finances are flexed to take into account alterations in product volume. Then, actual answers are in comparison towards the flexed budget and examined for product cost, efficiency, along with other variances. Additionally, the case enables for discussion regarding how flexible budgets can be used as management making decisions, and just how various compensation structures can impact financial results.

Excel Calculations

Planned and Actual Jobs               

Planned and Actual Prices               

Planned and Actual costs

Differences between the Actual and Planned

Difference between Planned and Actual Statement           

The New Budgeted Income Statement for 4,405 Jobs   

Reconciliation of Planned profit with the Actual Profit 

Questions Covered

Conceptually, what specific factors are likely to explain the difference between planned and actual results for the Squeaky Horn?

Prepare a revised budget with all prior planning assumptions retained, but use the total actual number of jobs the Squeaky Horn worked on (i.e., 4,405).

Prepare a profit reconciliation of planned versus actual profit by quantifying, in dollar terms, all significant contributing factors. (Hint: What did you identify in question 1?)

How do the different compensation arrangements at the Squeaky Horn impact profits?

What changes should Decker and his partners make based on the results of your analysis?