Question

18) Barsness C serviced. purposes and th orporation is an oil well service company that measures its output by the number of wells e actual results of operations for November. The company has provided th e following fixed and variable cost estimates that it uses for budgeting Actual Fixed Element Variable Element Total for Revenue Employee salaries and wages 56,800 Servicing materials Other expenses per Month per Well Serviced November S 4,400 190,100 S 1,100 S 103,400 $ 700 29,800 $ 35,300 $ 34,800 When the company prepared its planning budget at the beginning of November, it assumed that 39 wells would have been serviced. However, 43 wells were actually serviced during November. The amount shown for "Other expenses" in the planning budget for November would have been closest to: A) $35,300 B) S35,050 ) $34,800 D) $32,016 19) Magliacane Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per Variable Element Month Served Revenue Employee salaries and wages Travel expenses Other expenses 4,300 1,200 $ 700 $ 58,100 $ 31,900 When the company prepared its planning budget at the beginning of February, it assumed that 39 customers would have been served. However, 35 customers were actually served during February. The revenue in the company's flexible budget for February would have been closest to: A)$150,500 B)$153,200 C)$167,700 D)$170,709 20) Identify the situation below that will result in a favorable variance. A) Actual income is lower than expected income. B) Actual costs are higher than budgeted costs. C) Actual expenses are higher than budgeted expenses. D) Actual revenue is higher than budgeted revenue.

Answer 1

Ans.1) Option C: 34800

Amount of other expenses in planning budget is $34,800

Ans 2.) Option A: 150,500

In Flexible budget, Budgeted revenue and expenses are calculated for actual activity.

Hence Budgeted Revenue for 35 Customers is 4300*35 = 150,500

Ans3)

Option D Actual Revenue is higher than Budgeted Revenue

For a favourable variance:

In expenses: Actual cost should be less than budgeted cost

In Revenue: Actual revenue should be higher than budgetd revenue.

So Option D fulfill the above condition.