The Squeaky Horn Case Solution

Case Solution

This case offers students the opportunity to rehearse variance analysis with an annual operating plan using flexible budgeting capabilities. First, a static money is flexed to consider modifications in product volume. Then, actual solutions have been in comparison for the flexed budget and examined for product cost, efficiency, together with other variances. Furthermore, the case allows for discussion concerning how flexible budgets can be used management making choices, and the way various compensation structures could affect 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?