Question

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

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	21,400		$	15.00
Parts and supplies				$	7.50
Equipment depreciation	$	2,710		$	0.55
Truck operating expenses	$	5,780		$	1.80
Rent	$	4,620
Administrative expenses	$	3,840		$	0.70

For example, wages and salaries should be $21,400 plus $15.00 per repair-hour. The company expected to work 2,600 repair-hours in May, but actually worked 2,500 repair-hours. The company expects its sales to be $52.00 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.)

Answer 1

Jake's Roof Repair
Activity variances
For the month ended May 31
	Flexible budget	Planning budget	Activity variances
Repair-hours	2500	2600
Revenue	130000 [ 2500*52 ]	135200 [ 2600*52 ]	5200	U
Expenses :
Wages and salaries	58900 [ 21400+(2500*15) ]	60400 [ 21400+(2600*15) ]	1500	F
Parts and supplies	18750 [ 2500*7.50 ]	19500 [ 2600*7.50 ]	750	F
Equipment depreciation	4085 [ 2710+(2500*0.55) ]	4140 [ 2710+(2600*0.55) ]	55	F
Truck operating expenses	10280 [ 5780+(2500*1.80) ]	10460 [ 5780*(2600*1.80) ]	180	F
Rent	4620	4620	0	None
Administrative expenses	5590 [ 3840+(2500*0.70) ]	5660 [ 3840+(2600*0.70) ]	70	F
Total expense	102225	104780	2555	F
Net operating income	27775	30420	2645	U