Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,700 pounds of oysters in August. The company’s flexible budget for August appears below:

Quilcene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds (q) 7,700 Revenue ($4.10q) $ 31,570 Expenses: Packing supplies ($0.25q) 1,925 Oyster bed maintenance ($3,300) 3,300 Wages and salaries ($2,200 + $0.35q) 4,895 Shipping ($0.75q) 5,775 Utilities ($1,260) 1,260 Other ($470 + $0.01q) 547 Total expense 17,702 Net operating income $ 13,868

The actual results for August appear below:

Quilcene Oysteria Income Statement For the Month Ended August 31 Actual pounds 7,700 Revenue $ 27,500 Expenses: Packing supplies 2,095 Oyster bed maintenance 3,160 Wages and salaries 5,305 Shipping 5,505 Utilities 1,070 Other 1,167 Total expense 18,302 Net operating income $ 9,198

Required: Calculate the company’s revenue and spending variances for August.

Answer 1

Ans.	QUILCENE OYSTERIA
	Revenue & Spending Variances
	For the Month Ended August 31
		Actual results	Revenue and Spending Variance		Flexible Budget
	Pounds	7700			7700
	Revenue	$27,500	$4,070	U	$31,570
	Less: Expenses:
	Packing supplies	$2,095	$170	U	$1,925
	Oyster bed maintenance	$3,160	$140	F	$3,300
	Wages and salaries	$5,305	$410	U	$4,895
	Shipping	$5,505	$270	F	$5,775
	Utilities	$1,070	$190	F	$1,260
	Other	$1,167	$620	U	$547
	Total expenses	$18,302	$600	U	$17,702
	Net Operating Income	$9,198	$4,670	U	$13,868
	Revenue & Spending variance   =   Actual results - Flexible budget
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	*Increase in revenue or net operating income and decrease in expenses from flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from flexible budget to actual results =   Unfavorable.