Question

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

	Fixed Element per Month			Variable Element per Liter			Actual Total for June
Revenue				$	12.00		$	71,540
Raw materials				$	4.65		$	29,230
Wages	$	5,600		$	1.40		$	13,860
Utilities	$	1,630		$	0.20		$	3,270
Rent	$	2,600					$	2,600
Insurance	$	1,350					$	1,350
Miscellaneous	$	650		$	0.35		$	2,590

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $5,600 plus $1.40 per liter of gelato sold and the actual wages for June were $13,860. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (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.)

Answer 1

Computation of Revenue and Spending Variance - Via Gelato
	Actual	Flexible budget	Revenue and spending variances
Revenue	$71,540	$74,400	$2,860	U
		(6200*12)
Expenses:
Raw materials	$29,230	$28,830	$400	U
		(6200*4.65)
Wages	$13,860	$14,280	$420	F
		(6200*1.40)+5600
Utilities	$3,270	$2,870	$400	U
		(6200*0.20)+1630
Rent	$2,600	$2,600	$0	None
Insurance	$1,350	$1,350	$0	None
Miscellaneous	$2,590	$2,820	$230	F
		(6200*0.35)+650
Total expense	$52,900	$52,750	$150	U
Net operating income	$18,640	$21,650	$3,010

Let me know if any doubt Kindly mark with positive rating it would help me lot. Thanks in advance.