Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,900 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)		7,900
Revenue ($4.10q)	$	32,390
Expenses:
Packing supplies ($0.30q)		2,370
Oyster bed maintenance ($3,200)		3,200
Wages and salaries ($2,500 + $0.50q)		6,450
Shipping ($0.65q)		5,135
Utilities ($1,220)		1,220
Other ($430 + $0.01q)		509
Total expense		18,884
Net operating income	$	13,506

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,900
Revenue	$	26,800
Expenses:
Packing supplies		2,540
Oyster bed maintenance		3,060
Wages and salaries		6,860
Shipping		4,865
Utilities		1,030
Other		1,129
Total expense		19,484
Net operating income	$	7,316

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

Quilcene Oysteria
Revenue and Spending Variances
For the Month Ended August 31
		Flexible		Actual		Variances
Actual (q)		7900		7900		0
Revenue($4.10q)		32390		26800		-5590	Unfavourable
Expenses:
Packing Supplies		2370		2540		-170	Unfavourable
Oyster Maintenance		3200		3060		140	Favourable
Wages and Salaries($2500/0.5)		6450		6860		-410	Unfavourable
Shipping		5135		4865		270	Favourable
Utilities		1220		1030		190	Favourable
Other		509		1129		-620	Unfavourable
Total Expense		18884		19484		-600	Unfavourable
Net Income		13506		7316		-6190	Unfavourable
For revenue, We think it would raise - In above situation actual revenue < Flexible budget revenue so the situation is unfavourable.
For expenses, We think Actual expenses should be lower,,,,Actual expense < Budget = Favourable : Actual expense > budgeted expense = Unfavourable.