Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,300 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)		7,300
Revenue ($4.10q)	$	29,930
Expenses:
Packing supplies ($0.35q)		2,555
Oyster bed maintenance ($3,300)		3,300
Wages and salaries ($2,000 + $0.40q)		4,920
Shipping ($0.75q)		5,475
Utilities ($1,250)		1,250
Other ($460 + $0.01q)		533
Total expense		18,033
Net operating income	$	11,897

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,300
Revenue	$	26,700
Expenses:
Packing supplies		2,725
Oyster bed maintenance		3,160
Wages and salaries		5,330
Shipping		5,205
Utilities		1,060
Other		1,153
Total expense		18,633
Net operating income	$	8,067

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.)

	Quilcene Oysteria Revenue and Spending Variances For the Month Ended August 31 Revenue Expenses: Packing supplies Oyster bed maintenance Wages and salaries Shipping Utilities Other Total expense Net operating income

Answer 1

Revenue Variances for August

1. Sales Price Variance=Actual Quantity(Actual price - Standard price)

=7300[(26700/7300)-4.1]

=3230(U)

2. Sales Volume Variance=As both actual and standard quantities are same, it will be zero.

Variable Spending Variances for August (Packing Supplies+Shipping) (Wages and Salaries+Other)-Only variable portion

1. Spending Variance=Standard Amt - Actual Amt

=[2555+5475+(4920-2000)+(533-460)]-[2725+5205+(5330-2000)+(1153-460)]

=11023-11953

=930(U)

Fixed Spending Variances for August (Oyster bed maintenance+Utilities) (Wages and Salaries+Other)-Only fixed portion [It is assumed that fixed portion of semi variable expense remains the same as budgeted]

1. Spending Variance=Standard Amt - Actual Amt

=[3300+1250+2000+460]-[3160+1060+2000+460]

=7010-6680

=330(F)

Reconcilliation:

Total Sales Variance=Actual Sales - Standard Sales

=26700-29930

=3230(U)

Total Spending variance=Standard Expense-Actual Expense

=18033-18633

=600(U)

Total Profit Variance=Actual Profit - Standard Profit

=8067-11897

=3830(U)