Question

4. 14 Points ) Tajiri Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of May Tajiri Corporation Comparison of Planning Budget to Actual Results For the Month Ended May 31 Planning Actual Budget Results Variances Customers served .. 20,000 21,000 $72,000 $75,800 $3,800 F 1,100 U 1,300 F Revenue ($3.60q)............ Expenses: Wages and salaries ($22,600 + $1.109)... Supplies ($0.509).. Insurance ($4,600) .... Miscellaneous ($3,400 + $0.309)...... Total expense.. Net operating income............ 44,600 10,000 4,600 9,400 68,600 $3,400 45,700 8,700 4,600 8.100 67.100 $8,700 1.300 F 1.500 F $5,300 F Required: Prepare the company's flexible budget performance report for May. Label each variance as favorable unfavorable (U). Actual Results Rev & Spend Variance Flexible Budget Activity Variance Planning Budget Customers Served Revenue Expenses Wages & Salaries Supplies Insurance Miscelleneous Total Expense Net Operating Income

Answer 1

Ans.	TAJIRI CORPORATION
	Flexible Budget Performance Report
	For the Month Ended May 31
		Actual Results	Revenue & Spending variance	Flexible Budget	Activity variance	Planning Budget
	Customers served	21,000			21,000			20,000
	Revenue	$75,800	$200	F	$75,600	$3,600	F	$72,000
	Expenses:
	Wages and salaries	$45,700	$0	none	$45,700	$1,100	U	$44,600
	Supplies	$8,700	$1,800	F	$10,500	$500	U	$10,000
	Insurance	$4,600	$0	none	$4,600	$0	none	$4,600
	Miscellaneous expense	$8,100	$1,600	F	$9,700	$300	U	$9,400
	Total expenses	$67,100	$3,400	F	$70,500	$1,900	U	$68,600
	Net operating income	$8,700	$3,600	F	$5,100	$1,700	F	$3,400
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as planning budget.
	*Calculation of Flexible budget:
		Flexible Budget
	Customers served	21,000
	Revenue	$3.60 * 21,000
	Expenses:
	Wages and salaries	$22,600 + (21,000 * $1.10)
	Supplies	$0.50 * 21,000
	Insurance	$4,600
	Miscellaneous expense	$3,400 + (21,000 * $0.30)
	Revenue & Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in revenue or net operating income from planning budget to flexible budget and flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income from planning budget to flexible budget and flexible budget to actual results =   Unfavorable.
	*Increase in expenses from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget =   Favorable.