Question

Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 5,600 units, but its actual level of activity was 5,560 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

	Fixed element per month			Variable element per unit
Revenue		-		$	29.00
Direct labor	$	0		$	3.60
Direct materials		0			9.70
Manufacturing overhead		38,700			1.30
Selling and administrative expenses		24,300			0.40
Total expenses	$	63,000		$	15.00

Actual results for June:

Revenue	$	165,382
Direct labor	$	19,481
Direct materials	$	51,677
Manufacturing overhead	$	45,828
Selling and administrative expenses	$	26,554

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 June would be closest to:

Multiple Choice

A $6,442 F

B $6,442 U

C $7,002 F

D $7,002 U

PLEASE SHOW STEPS

Answer 1

Answer- 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 June would be closest to= $7002 F (Option C).

Explanation-

TREVORROW CORPORATION
Revenue & Spending Variance
For the month ended June
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$		$
Revenue	5560 units*$29 per unit	161240	165382	4142	Favorable
Less:-Expenses
Direct labor	5560 units*$3.60 per unit	20016	19481	535	Favorable
Direct materials	5560 units*$9.70 per unit	53932	51677	2255	Favorable
Manufacturing overhead	(5560 units*$1.30 per unit)+$38700	45928	45828	100	Favorable
Selling & Administrative expenses	(5560 units*$0.40 per unit)+$24300	26524	26554	-30	Unfavorable
Total Expenses		146400	143540	2860	Favorable
Net Operating Income		14840	21842	7002	Favorable