Question

4. Connor Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for June.

	Fixed Element per Month			Variable Element per Customer		Actual Total for June
Revenue				$	6,500	$	169,700
Employee salaries and wages	$	58,400		$	1,000	$	83,200
Travel expenses				$	700	$	18,600
Other expenses	$	41,500				$	41,900

When the company prepared its planning budget for June at the end of May, it assumed that 21 customers would be served in June. However, 26 customers were actually served during June. Prepare a flexible budget performance report showing Connor Corporation’s numbers for all 5 columns below. Label the variance columns properly in the report below and show both the dollar amount and the symbol (F or U) for each variance.

Answer 1

Notes:

1.Fixed Cost per month remains constant irrespective of customer increases or decreases

2.Variable cost per customer remains same irrespective of customer increases or decreases

Flexible Budget Performance Report for 26 Customers:-

Particulars	Fixed Cost per month($)	Variable cost per unit($)	Actual Total for June	Budgeted Total for June	Variance	F/U*
Revenue		6500	169700	169000 (6500*26)	$700	F
Employee Salaries & Wages	58400	1000	83200	84400 (58400+(1000*26))	$1200	F
Travel Expenses		700	18600	18200 (700*26)	$400	U
Other Expenses	41500		41900	41500	$400	U

*In the absence of information it is assumed that symbol (F or U) denotes Favorable or Unfavorable.