Question

Multiple steps are requried for this 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			$	5,600		$	182,000
Employee salaries and wages	$	55,000	$	1,600		$	110,300
Travel expenses			$	850		$	27,200
Other expenses	$	34,000				$	32,600

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

Please answer the following letters towards the question

a. What amount of revenue would be included in Adger’s flexible budget for May?

b. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?

c. What amount of travel expenses would be included in Adger’s flexible budget for May?

d. What amount of other expenses would be included in Adger’s flexible budget for May?

e. What net operating income would appear in Adger’s flexible budget for May?

f. What is Adger’s revenue 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.)

g. What is Adger’s employee salaries and wages 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.)

h. 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.)

i What is Adger’s other 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.)

j.  What amount of revenue would be included in Adger’s planning budget for May?

k.  What amount of employee salaries and wages would be included in Adger’s planning budget for May?

l. What amount of travel expenses would be included in Adger’s planning budget for May?

m. What amount of other expenses would be included in Adger’s planning budget for May?

n. What activity variance would Adger report in May with respect to its revenue? (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.)

o. What activity variances would Adger report with respect to each of its expenses 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

a. What amount of revenue would be included in Adger’s flexible budget for May?

Revenue in flexible budget= 35*$5600= $196000

b. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?

Employee salaries and wages in flexible budget= 35*$1600+$55000= $111000

c. What amount of travel expenses would be included in Adger’s flexible budget for May?

Travel expenses in flexible budget= 35*$850= $29750

d. What amount of other expenses would be included in Adger’s flexible budget for May?

Other expenses in flexible budget= $34000

e. What net operating income would appear in Adger’s flexible budget for May?

Total expenses in flexible budget= Employee salaries and wages+Travel expenses+Other expenses

= $111000+29750+34000= $174750

Net operating income= Revenue-Total expenses

= $196000-174750= $21250

f. What is Adger’s revenue variance for May?

Revenue variance= Actual results-Revenue in flexible budget

= $182000-196000= $14000 U

g. What is Adger’s employee salaries and wages spending variance for May?

Employee salaries and wages spending variance= Actual results-Employee salaries and wages in flexible budget

= $110300-111000= $700 F

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

Travel expense spending variance= Actual results-Travel expenses in flexible budget

= $27200-29750= $2550 F

i What is Adger’s other expenses spending variance for May?

Other expense spending variance= Actual results-Other expenses in flexible budget

= $32600-34000= $1400 F

j.  What amount of revenue would be included in Adger’s planning budget for May?

Revenue in planning budget= 30*$5600= $168000

k.  What amount of employee salaries and wages would be included in Adger’s planning budget for May?

Employee salaries and wages in planning budget= 30*$1600+$55000= $103000

l. What amount of travel expenses would be included in Adger’s planning budget for May?

Travel expense in planning budget= 30*$850= $25500

m. What amount of other expenses would be included in Adger’s planning budget for May?

Other expenses in planning budget= $34000

n. What activity variance would Adger report in May with respect to its revenue?

Revenue activity variance= Revenue in flexible budget-Revenue in planning budget

= $196000-168000= $28000 F

o. What activity variances would Adger report with respect to each of its expenses for May?

	Flexible Budget	Planning Budget	Activity Variance
Employee salaries and wages	$111000	$103000	8000	U
Travel expenses	29750	25500	4250	U
Other expenses	34000	34000	0	NONE
Total expenses	$174750	$162500	$12250	U