Question

! Required information [The following information applies to the questions displayed below.] Adger Corporation is a service company that measures 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 Variable Element Actual per Customer Served Total per Month for May $ 189,500 $ 105,900 $ 25,600 $ 5,800 $ 1,500 Revenue Employee salaries and wages Travel expenses Other expenses $54,000 $ 800 $33,000 $ 31,700 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. 6. What is Adger's revenue variance 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.) Revenue variance

Answer 1

Ans. 6 Revenue variance $13,500 unfavorable Ans. 7 Employee salaries and wages spending variance = $600 favorable Ans. 8 Travel expense spending variance = $2,400 favorable Ans. 9 Other expense spending variance = $1,300 favorable Ans. 10 Revenue of planning budget $174,000 *Working Notes:

Ans. ADGER CORPORATION Flexible Budget Performance Report For the Month Ended MAY 31 Spending variance Flexible Budget Activity variance Actual Results 35 Planning Budget 30 Customers 35 $189,500 $13,500 $203,000 $29,000 $174,000 Revenue Expenses: Employee salaries and wages Travel expenses Other expenses Total expenses Net operating income U $105,900 $25,600 $31,700 $163,200 $26,300 $600 $2,400 $1,300 $4,300 $9,200 $106,500 $28,000 $33,000 $167,500 $35,500 $7,500 $4,000 $0 $11,500 $17,500 none $99,000 $24,000 $33,000 $156,000 $18,000 *Flexible budget is prepared on the basis of actual units. *Fixed expenses remain same as planning budget.

*Calculation of Flexible & Planning budget: Flexible Budget 35 Planning Budget 30 $5,800 * 30 $5,800 * 35 Customers Revenue Expenses: Employee salaries and wages Travel expenses Other expenses $54,000 + ($1,500 * 35) $800 * 35 $33,000 $54,000 + ($1,500 * 30) $800 * 30 $33,000 *Increase in expenses from flexible budget to actual results & Planning budget to flexible budget = Unfavorable. *Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget = Favorable. Revenue & Spending variance = Actual results - Flexible budget Activity variance = Flexible budget - Planning budget *Increase in revenue or net income from flexible budget to actual results & Planning budget to flexible budget = favorable. *Decrease in revenue or net income from flexible budget to actual results & Planning budget to flexible budget = unfavorable.