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				$	7.30
Equipment depreciation	$	2,730		$	0.55
Truck operating expenses	$	5,740		$	1.60
Rent	$	4,690
Administrative expenses	$	3,830		$	0.50

For example, wages and salaries should be $21,400 plus $15.00 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,700 repair-hours. The company expects its sales to be $52.00 per repair-hour.

Required:

Compute the company’s activity variances for May

Answer 1

	Flexible budget	Planning budget	Activity variance
Repair hours	2,700	2,800	100
Revenue @$52	140,400	145,600	5200 U
Expenses:
Wages and salaries	40,500	42,000	1500 F
Parts and supplies@$ 7.3	19,710	20,440	730 F
Equipment depreciation@$0.55	1,485	1,540	55 F
Truck operating expenses@$1.60	4,320	4,480	160 F
Rent	4690	4,690	None
Administrative expenses@$0.50	1,350	1,400	50 F
Total expenses	72,055	74,550	2,495
Net operating income	68,345	71,050	2,705