1. What is your assessment of the method the administrator used to construct the budget?In our group opinion, the method used to construct the budget was not proper because it was lack of many elements in calculating the budget forecasting. For example, it did not consider inflation, economic growth, increasing prices, etc. Instead, the administrator reduced the previous average budget by 3% due to instalation fee paid in the previous year. On the other hand, prices are getting higher because of the inflation, economic growth, and the increase of life quality.

2. Prepare a flexible budget for the laundry departement. What does it tell you?Flexible Budget

Variable CostUnits

Unit Cost/Unit125000150000175000

Laundry Labor0.07290001080012600

Supplies0.009112513501575

Water0.014175021002450

Maintenance0.011137516501925

Fixed Cost

Equipment Depreciation1250125012501250

Salary3125312531253125

Allocated Admin Costs4000400040004000

Total216252427526925

The management should separate the variable cost and the fixed cost. The difference happened in the budget and the actual happens because of the changes of the variable cost. If they separate the variable and the fixed cost, they will anticipate to the changes of the quantities. In the flexible budget, laundry labor, supplies, water and maintenance are categorized as the variable cost because the cost will change and relate to the changes of the quantity. On the other hand, Salary and Allocate Admin costs are categorized as fixed cost, because the quantities will not affect those cost, the cost will be the same.

In conclusion, the management will know how much the changes of cost, which happens because of the changing of the volume, so they can anticipate and calculate the budget cost, so there will be no more over budget cost. 3. Compute the appropriate labor variances. What do they tell you?

Actual Hours per PoundsStandard Hours per PoundsActual Rate per PoundsStandard Rate per Pounds

0.470.48$ 10.2$ 9

Management Control SystemGroup Assignment: April 31st, 2015GROUP 7: 64 INTERNATIONAL BPutri Amandhari | Septania Wibowo |Tommy Lesmana | Ummi Aliyah

Step 1Actual Hours= total pounds x actual hours per pounds= 156,600 x 0.47= 73,602

Step 2Actual Cost= actual hours x actual rate= 73,602 x 10.2= 750,740.4

Step 3Standard Cost of Actual Hours = actual hours x standard rate= 73,602 x 9 = 662,418Step 4Labor Rate Variance= actual cost standard cost of actual hours= 750,740.4 662,418= 88,322.4

The Labor Variance indicates that the actual cost is higher than the standard cost. This means the budget calculation less precise. It should have considered the other factors, both internal and external.

4. What should Mr. Donaldson tell the administrator about his budget variances?First they are doing Variance Analysis, it seen than the gap between the actual number and the baseline cost. More labor hours would create an unfavorable labor efficiency variance, which could decrease your expected profit and yes, adverse variance will reduce the business profit. There is variance in his budget because there are changes of the quantity and also price of the supplies. He estimates that the price will remain the same without consider the inflation and any other economic condition. The other reason why there is variance in his budgeting, because he wrongly estimate how long it takes to serve one customer. The estimation time is shorter than the actual time. This makes the increase of the cost because of the longer time needed to finish the job. Not only the time, but also the number of customer who came to the shelter is more than estimated. This also made the variance in his budgeting.

1) Changes in conditions: Considering the business is not only affected by the internal condition but also external condition. They have to be sensitive about what is happening in their surrondings that will direct or indirectly impact their business.2) The quality of management: Special care to reduce costs can result in favorable variances. On the other hand, management carelessness can drive up unfavorable variances. By maximizing and creating efficient time through work hours could cut the excessed budget. mix a higher skilled direct labor workers nade nire efficient use of labor hours employee training program improve effiecient use of time high quality materials resulted in fewer defective products and more efficient use of time.3) Flexible Budget Variance in the future. Implementing a flexible budget varies to adjust for fluctuations or shifts in the volume of sales-related activity. A flexible budget reflects multiple changes for various levels. Instead of static forecasts, a flexible budget -- also referred to as a flex budget or variable budget-- shows costs as a percentage of sales

REFERENCEShttp://smallbusiness.chron.com/budget-variance-analysis-60250.html, accessed May 5th 2015.http://catalog.flatworldknowledge.com/bookhub/reader/4402?e=heisinger_1.0-ch10_s05, accessed May 5th 2015.