Question

Answer the question using the provided information:

The budgeted variable cost per pound of laundry is $0.072

The actual variable cost per pound of laundry is $0.0799

The budgeted volume is 125,000 pounds The actual volume is 156,600 pounds.

Budgeted fixed cost is $4,000

Actual fixed cost is $4,000

Use these figures to find the original (static) budgeted expense, the actual expense, and the flexible budget expense. (Find total expenses, not expenses per pound of laundry) Original (static) budgeted expense .

1. How much of the expense variance can be explained by factors other than the fact the laundry produced more output than budgeted?

Answer 1

1. $ 1,237.14 of the expense variance can be explained by factors other than the fact the laundry produced more output than budgeted.

	Actual Results	Expense Variance	Flexible Budget	Volume Variances	Static Budget
Activity Level	156,600 pounds		156,600 pounds		125,000 pounds
Variable cost	$ 12,512.34	$ 1,237.14 U	$11,275.20	$ 2,275 U	$ 9,000
Fixed Cost	4,000	0	4,000	0	4,000
Total Expenses	$ 16,512.34	$ 1,237.14	$ 15,275.20	$ 2,275	$ 13,000

Static budget variable cost = 125,000 x $ 0.072 = $ 9,000

Flexible budget variable cost = 156,600 x $ 0.072 =  $ 11,275.20

Actual variable cost = 156,600 x $ 0.0799 = $ 12,512.34