Question

Jake’s Roof Repair has provided the following data concerning its costs:

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	21,300		$	15.00
Parts and supplies				$	7.30
Equipment depreciation	$	2,740		$	0.45
Truck operating expenses	$	5,710		$	1.70
Rent	$	4,660
Administrative expenses	$	3,900		$	0.60

For example, wages and salaries should be $21,300 plus $15.00 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,700 repair-hours. The company expects its sales to be $51.00 per repair-hour.

Required:

Compute the company’s activity variances for May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Jake’s Roof Repair Activity Variances For the Month Ended May 31 Revenue Expenses: Wages and salaries Parts and supplies Equipment depreciation Truck operating expenses Rent Administrative expenses Total expense Net operating income

Answer 1

Jake's Roof Repair Activity Variance For the Month Ended May 31 Revenue 5,100 Expenses: Wages and Salaries 1,500F Parts and supplies 730F Equipment depreciation 45 F Truck operating expenses Rent None Administrative expenses 60 F Total Expense 2,505F Net Operating Income 2,595 U 170 Working Notes Flexible Budget Activity Variance [A-B] [A] Repair hours (9) Revenue (9 x 51) Wages and salaries (21,300 + x 15) Parts and supplies (qx 7.30) Equipment depreciation (2,740+q x 0.45) Truck operating expense (5,710 +2 x 1.70) Rent Administrative expense (3,900 + x 0.60) Total expense Net Operating income 2,700 137,700 61,800 19,710 3,955 10,300 4,660 5,520 105,945 31,755 Planning Budget [B] 2,800 142,800 63,300 20,440 4,000 10,470 4,660 5,580 108,450 34,350 5,100U 1,500F 730F 45F 170F - None 60F 2,505 2,595U