Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 pounds of oysters in August. The company’s flexible budget for August appears below:

Quilcene Oysteria
Flexible Budget
For the Month Ended August 31
Actual pounds (q)		8,000
Revenue ($4.00q)	$	32,000
Expenses:
Packing supplies ($0.50q)		4,000
Oyster bed maintenance ($3,200)		3,200
Wages and salaries ($2,900 + $0.30q)		5,300
Shipping ($0.80q)		6,400
Utilities ($830)		830
Other ($450 + $0.05q)		850
Total expense		20,580
Net operating income	$	11,420

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		8,000
Revenue	$	35,200
Expenses:
Packing supplies		4,200
Oyster bed maintenance		3,100
Wages and salaries		5,640
Shipping		6,950
Utilities		810
Other		980
Total expense		21,680
Net operating income	$	13,520

Required:

Calculate the company’s revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Quilcene Oysteria
Revenue and Spending Variances      [Refer working note]
For the Month Ended August 31
Revenue	$3,200	F
Expenses:
Packing supplies	$200	U
Oyster bed maintenance	$100	F
Wages and salaries	$340	U
Shipping	$550	U
Utilities	$20	F
Other	$130	U
Total Expenses	$1,100	U
Net Operating Income	$2,100	F

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Working note - Revenue and Spending Variances
	Flexible Budget	Actual results [Refer Income statement]	Revenue and Spending Variances [Flexible budget - Actual results]
Revenue	$32,000	$35,200	$3,200
Expenses:
Packing supplies	$4,000	$4,200	$200
Oyster bed maintenance	$3,200	$3,100	$100
Wages and salaries	$5,300	$5,640	$340
Shipping	$6,400	$6,950	$550
Utilities	$830	$810	$20
Other	$850	$980	$130
Total Expenses	$20,580	$21,680	$1,100
Net Operating Income	$11,420	$13,520	$2,100

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Note

1. A revenue variance is said to favorable when revenue as per flexible budget is more than the revenue as per the planning budget

2. A revenue variance is said to Unfavorable when revenue as per flexible budget is less than the revenue as per the planning budget

3. An expense variance is said to favorable when expense as per flexible budget is less than the expense as per the planning budget

4. Anx expense variance is said to Unfavorable when expense as per flexible budget is more than the expense as per the planning budget