Question

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	5,900		$	216,500
Employee salaries and wages	$	66,000	$	1,300		$	116,200
Travel expenses			$	580		$	19,700
Other expenses	$	45,000				$	42,500

When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.

Foundational 9-8

8. What is Adger’s travel expenses spending variance for May? (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

						40			35
			actual	revenue and spending	variance	Flexible	Activity variance		planned
			result	variance		budget			budget
Revenue			216,500	19,500	U	236000	29500	F	206500
Expenses
employee salaries and wages			116,200	1,800	F	118000	6500	U	111500
travel expenses			19,700	3,500	F	23200	2900	U	20300
other expenses			42,500	2,500	F	45,000	0	N	45,000
total expense			178,400	7,800	F	186200	9400	U	176800
net income			38,100	11,700	U	49800	20100	F	29700

8)

travel expense -spending variance

3,500

F