Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 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)		8,000
Revenue ($4.10q)	$	32,800
Expenses:
Packing supplies ($0.40q)		3,200
Oyster bed maintenance ($3,500)		3,500
Wages and salaries ($2,500 + $0.45q)		6,100
Shipping ($0.55q)		4,400
Utilities ($1,210)		1,210
Other ($480 + $0.01q)		560
Total expense		18,970
Net operating income	$	13,830

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		8,000
Revenue	$	26,900
Expenses:
Packing supplies		3,370
Oyster bed maintenance		3,360
Wages and salaries		6,510
Shipping		4,130
Utilities		1,020
Other		1,180
Total expense		19,570
Net operating income	$	7,330

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.)

Answer 1

Calculation of revenue variances

Budgeted Qty.(BQ)	B.selling price(BSP)	B.sales	Actual Qty.(AQ)	Actual selling price(ASP)	A.sales
8000	4.1	32800	8000	3.3625	26900

(1) sales value variance = B.sales - A.sales

=32800-26900

= $5,900(U)

(2) sales price variance = (BSP-ASP)AQ

=(4.1-3.3625)8000

= $5900(U)

(3) sales volume variance = (BQ-AQ)BSP

=(8000-8000)4.1

= $0(None)

Calculation of spending variances

Expenses	Standards($)	Actuals($)
Qty.	Rate	Variable	Fixed	Total	Qty.	Rate	Variable	Fixed	Total
Packing supplies	8000	0.40	3200	-	3200	8000	0.42125	3370	-	3370
wages & salaries	8000	0.45	3600	2500	6100	8000	0.50125	4010	2500	6510
Shipping	8000	0.55	4400	-	4400	8000	0.51625	4130	-	4130
Other	8000	0.01	80	480	560	8000	0.0875	700	480	1180

Variable overhead expenditure variance = (SR-AR)AQ

packing supplies = (0.40-0.42125)8000 = $170(U)

wages & salaries = (0.45-0.50125)8000 = $410(U)

shipping = (0.55-0.51625)8000 = $270(F)

other = (0.01-0.0875)8000 = $620(U)

Fixed overhead cost variance = BFO-AFO

Oyster bed maintenance = 3500-3360= $140(F)

Utilities = 1210-1020 = $190(F)

Note-

SR = Standard Rate

AR = Actual Rate

AQ = Actual Qty.

BFO = Budgeted Fixed Overheads

AFO = Actual Fixed Overheads