Question

Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,480 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:

	Fixed element per month			Variable element per tenant-day
Revenue		-		$	35.30
Wages and salaries	$	2,500		$	5.90
Food and supplies		400			13.80
Facility expenses		8,900			3.40
Administrative expenses		7,800			0.40
Total expenses	$	19,600		$	23.50

Actual results for February:

Revenue	$	85,654
Wages and salaries	$	16,992
Food and supplies	$	33,084
Facility expenses	$	16,682
Administrative expenses	$	8,732

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for February would be closest to:

Answer 1

Solution:

Paulis Kennel
Revenue and spending variance
	Actual results	Revenue and spending variance		Flexible Budget
Tenant days	2480			2480
Revenue	$85,654	$1,890	U	$87,544
Expense:
Wages and salaries	$16,992	$140	F	$17,132
Food and Supplies	$33,084	$1,540	F	$34,624
Facility Expenses	$16,682	$650	F	$17,332
Administrative expense	$8,732	$60	F	$8,792
Total Expenses	$75,490	$2,390	F	$77,880
Net Operating Income	$10,164	$500	F	$9,664