In: Accounting
Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 3,900 tenant-days, but its actual level of activity was 3,880 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:
Data used in budgeting:
Fixed element per month | Variable element per tenant-day | ||||
Revenue | - | $ | 30.40 | ||
Wages and salaries | $ | 2,900 | $ | 6.40 | |
Food and supplies | 300 | 11.20 | |||
Facility expenses | 7,900 | 3.40 | |||
Administrative expenses | 7,700 | 0.40 | |||
Total expenses | $ | 18,800 | $ | 21.40 | |
Actual results for February:
Revenue | $ | 107,680 |
Wages and salaries | $ | 23,490 |
Food and supplies | $ | 36,789 |
Facility expenses | $ | 19,240 |
Administrative expenses | $ | 9,138 |
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 February would be closest to:
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 February would be closest to = $2903 F.
Explanation-
PAULIS KENNEL | |||||
Revenue & Spending Variances | |||||
For the month ended February | |||||
Particulars | Flexible Budget | Actual Results | Variances | Remark | |
$ | $ | $ | |||
Revenue | 3880 tenant-days*$30.40 per tenant-days | 117952 | 107680 | -10272 | Unfavorable |
Less:-Expenses | |||||
Wages & salaries | $2900+(3880 tenant-days*$6.40 per tenant-days) | 27732 | 23490 | 4242 | Favorable |
Food and Supplies | $300+(3880 tenant-days*$11.20 per tenant-days) | 43756 | 36789 | 6967 | Favorable |
Facility Expenses | $7900+(3880 tenant-days*$3.40 per tenant-days) | 21092 | 19240 | 1852 | Favorable |
Administrative expenses | $7700+(3880 tenant-days*$0.40 per tenant-days) | 9252 | 9138 | 114 | Favorable |
Total Expenses | 101832 | 88657 | 13175 | Favorable | |
Income from opreations | 16120 | 19023 | 2903 | Favorable |