Question

2. Immen Corporation bases its budgets on the activity measure customers served. During May, the company planned to serve 38,000 customers. The company has provided the following data concerning the formulas its uses in its budgeting: Fixed element Variable element per month per customer Revenue... $2.70 Wages and salaries $36,300 $0.80 Supplies.. SO $0.30 Insurance $6,900 $0.00 Miscellaneous 56,200 50.20 The company has also furnished its income statement for May: Immen Corporation Income Statement For the Month Ended May 31 Actual customers served 42.000 Revenue $115.500 Expenses: Wages and salaries... 72.700 Supplies.... 15,200 Insurance. 7.400 Miscellaneous 14.700 Total expense 110.000 Net operating income $ 3.500 Required: Prepare a report showing the company's activity variances for May. Indicate in each case whether the variance is favorable (F) or unfavorable (U). (15%)

Answer 1

Answer-

Immen Corporation
Activity variances
For the month ended May 31
Particulars	Planning Budget	Flexible Budget	Activity Variances	Remark
	$	$	$
Customers served	38000	42000
Revenue (a)	38000 customers*$2.70 per customer=$102600	42000 customers*$2.70 per customer=$113400	10800	Favorable
Expenses:-
Wages & Salaries	($0.80 per customer served*38000 customers)+$36300 = $66700	($0.80 per customer served*42000 customers)+$36300 = $69900	-3200	Unfavorable
Supplies	($0.30 per customer served*38000 customers) = $11400	($0.30 per customer served*42000 customers) = $12600	-1200	Unfavorable
Insurance	$6900	$6900	0	None
Miscellenous	($0.20 per customer served*38000 customers)+$6200 = $13800	($0.20 per customer served*42000 customers)+$6200 = $14600	-800	Unfavorable
Total expenses (b)	98800	104000	-5200	Unfavorable
Net Opreating income c=(a-b)	3800	9400	5600	Favorable