Question

ADGER CORPORATION IS A SERVICE COMPANY THAT MEASURE ITS OUTPUT BASED ON THE NUMBER OF CUSTOMERS SERVED. THE COMPANY PROVIDED THE FOLLOWING FIXED AND VARIABLE COST ESTIMATES THAT IT USES FOR BUDGETING PURPOSES AND THE ACTUAL RESULTS FOR MAY AS SHOWN BELOW:

                                                                 FIXED ELEMENT PER MONTH                                  VARIABLE ELEMENT PER CUSTOMER                                 ACTUAL TOTAL FOR MAY

REVENUE                                                                                                                                      $5,000                                                                                $160,000

EMPLOYEE SALARIES AND WAGES                  $50,0000                                                          $1,100                                                                                $88,000

TRAVEL EXPENSES                                                                                                                     $600                                                                                    $19,000

OTHER EXPENSES                                             $36,000                                                                                                                                                          $34,500

WHEN PREPARING ITS PLANNING BUDGET THE COMPANY ESTIMATED THAT IT WOULD SERVE 30 CUSTOMERS PER MONTH; HOWEVER, DURING MAY THE COMPANY ACTUALLY SERVED 35 CUSTOMERS.

REQUIRED (ALL CALCULATIONS PERTAIN TO THE MONTH OF MAY)

1. WHAT AMOUNT OF REVENUE WOULD BE INCLUDED IN ADGER'S FLEXIBLE BUDGET?

2. WHAT AMOUNT OF EMPLOYEES SALERIES AND WAGES WOULD BE INCLUDED INF ADGER'S FLEXIBLE BUDGET?

3. WHAT AMOUNT OF TRAVEL EXPENSE WOULD BE INCLUDED IN ADGER'S FLEXIBLE BUDGET?

4. WHAT AMOUNT OF OTHER EXPENSE WOULD BE INCLUDED IN ADGER'S FLEXIBLE BUDGET?

5. WHAT NET OPERATING INCOME WOULD APPEAR IN ADGER'S FLEXIBLE BUDGET?

6. WHAT IS ADGER'S REVENUE VARIANCE?

7. WHAT IS ADGER'S EMPLOYEES SALARIES AND WAGES SPENDING VARIANCE?

8, WHAT IS ADGER'S TRAVEL EXPENSE SPENDING VARIANCE?

9. WHAT IS ADGER'S OTHER EXPENSE SPENDING VARIANCE?

10. WHAT AMOUNT OF REVENUE WOULD BE INCLUDED IN ADGER'S PLANNING BUDGET?

11. WHAT AMOUNT OF EMPLOYEES SALARIES AND WAGES WOULD BE INCLUDED IN ADGER'S PLANNING BUDGET?

12. WHAT AMOUNT OF TRAVEL EXPENSES WOULD BE INCLUDED IN ADGER'S PLANNING BUDGET?

13. WHAT AMOUNT OF OTHER EXPENSES WOULD BE INCLUDED IN ADGER'S PLANNING BUDGET?

14. WHAT ACTIVITY VARIANCE WOULD ADGER'S REPORT WITH RESPECT TO ITS REVENUE?

15. WHAT ACTIVITY VARIANCES WOULD ADGER REPORT WITH RESPECT TO EACH OF ITS EXPENSES?

PLEASE SHOW ALL WORK

Answer 1

1	Amount of revenue in flexible budget	$175,000	(35*5000)
2	Employees Salaries and wages in flexible budget
	Variable expenses=	$38,500	(35*1100)
	Fixed Expense	$50,000
	Employees Salaries and wages in flexible budget	$88,500
3	Amount of travel expense in flexible budget	$21,000	(35*600)
4	Other expense included in flexibe budget	$36,000
5	Net Operating Income in flexible budget	$29,500	(175000-88500-21000-36000)
6	Revenue Variance	$15,000	Unfavorable	(175000-160000)
7	Employees Salaries and wages spending variance	$500	Favorable	(88500-88000)
8	Travel expense spending variance	$2,000	Favorable	(21000-19000)
9	Other expense spending variance	$1,500	Favorable	(36000-34500)
10	Revenue included in Planning Budget	$150,000	(30*5000)
11	Employees Salaries and wages in Planning budget	$83,000	(30*1100+50000)
12	Amount of travel expense in Planning budget	$18,000	(30*600)
13	Other expense included in Planning budget	$36,000
14	Activity Variance of Revenue	$25,000	Favorable	(35-30)*5000