Question

During September, ComeHome Corporation budgeted for 24,000 customers, but actually served 28,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:

• Revenue: $51.50q
• Wages: $14.00q
• Supplies: $8.20q
• Insurance: $7,300 per month
• Rent: $3,950 per month
• Miscellaneous expense: $3,000 month + $4.40q

1. Prepare the company's planning budget for September (use Thursday’s lecture slides and exhibit 9-2 of your text as a guide).
2. Prepare the company's flexible budget for September (use Thursday’s lecture slides and exhibit 9-5 of your text as a guide).
3. Calculate the company’s activity variances for each line item for September (use Thursday’s lecture slides and exhibit 9-6 of your text as a guide). You must also indicate whether each specific activity variance is favorable (‘F’) or unfavorable (‘U’).

Answer 1

Solution a:

Comehome corporation
Planning Budget
For the month ended September 30
Particulars
Nos of customers	24000
Revenue	$1,236,000.00
Expenses:
Wages	$336,000.00
Supplies	$196,800.00
Insurance	$7,300.00
Rent	$3,950.00
Miscellaneous expense	$108,600.00
Total Expenses	$652,650.00
Net Operating Income	$583,350.00

Solution b:

Comehome corporation
Felxible Budget
For the month ended September 30
Particulars	Flexible Budget
Nos of customers	28000
Revenue	$1,442,000.00
Expenses:
Wages	$392,000.00
Supplies	$229,600.00
Insurance	$7,300.00
Rent	$3,950.00
Miscellaneous expense	$126,200.00
Total Expenses	$759,050.00
Net Operating Income	$682,950.00

Solution c:

Comehome corporation
Activity Variances
For the month ended September 30
Particulars	Flexible Budget	Activity Variances	Planning Budget
Nos of customers	28000			24000
Revenue	$1,442,000.00	$206,000.00	F	$1,236,000.00
Expenses:
Wages	$392,000.00	$56,000.00	U	$336,000.00
Supplies	$229,600.00	$32,800.00	U	$196,800.00
Insurance	$7,300.00	$0.00	None	$7,300.00
Rent	$3,950.00	$0.00	None	$3,950.00
Miscellaneous expense	$126,200.00	$17,600.00	U	$108,600.00
Total Expenses	$759,050.00	$106,400.00	U	$652,650.00
Net Operating Income	$682,950.00	$99,600.00	F	$583,350.00