For the convenience of its reporters and staff based in London, Nightly News operates a motor pool. The motor pool operated with 20 vehicles until February of this year, when it acquired an additional automobile.
The motor pool furnishes petrol( gasoline), oil, and other supplies for the cars and hires one mechanic who does routine maintenance and minor repairs. Major repairs are done at a nearby commercial garage. A supervisor manages the operations. Each year the supervisor prepares an operating budget, informing Nightly News management of the funds needed to operate the pool. Depreciation on the automobiles is recorded in the budget in order to determine the cost per kilometer.
The schedule below presents the annual budget approved by the news division. The actual costs for March are compared with one-twelfth of the annual budget
P8-38( similar to) p. 314
Suppose a chain of RFC franchises in Shanghai had budgeted sales for 2012 of RMB 7.7 million( where RMB stands for the Chinese unit of currency, officially the renminbi, also called the yuan). Cost of goods sold and other variable costs were expected to be 60 % of sales. Budgeted annual fixed costs were RMB 1.4 million. A strong Chinese economy caused actual 2012 sales to rise to RMB 10.1 million and actual profits to increase to RMB 2,300,000. Fixed costs in 2012 were as budgeted. The franchisee was pleased with the increase in profit.