Question

Jake’s Roof Repair has provided the following data concerning its costs:

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	20,700		$	16.00
Parts and supplies				$	7.30
Equipment depreciation	$	2,730		$	0.35
Truck operating expenses	$	5,720		$	1.60
Rent	$	4,640
Administrative expenses	$	3,850		$	0.60

For example, wages and salaries should be $20,700 plus $16.00 per repair-hour. The company expected to work 2,700 repair-hours in May, but actually worked 2,600 repair-hours. The company expects its sales to be $45.00 per repair-hour.

Required:

Compute the company’s activity variances for May. (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

Answer:-

Jake's Roof
Activity variances
For the month ended May
Particulars	Planning Budget	Flexible Budget	Activity Variances	Remark
	$	$	$
Repair hours	2700	2600
Sales Revenue	2700 hours*$45 per hour =121500	2600 hours*$45 per hour =117000	4500	Unfavourable
Less:- Expenses
Wages & Salaries	20700+(2700 hours*$16 per hour) =63900	20700+(2600 hours*$16 per hour) =62300	1600	Favourable
Part & supplies	2700 hours*$7.30 per hour =19710	2600 hours*$7.30 per hour =18980	730	Favourable
Equipment depreciation	2730+(2700 hours*$.35 per hour) =3675	2730+(2600 hours*$.35 per hour) =3640	35	Favourable
Truck operating expenses	5720+(2700 hours*$1.60 per hour) =10040	5720+(2600 hours*$1.60 per hour) =9880	160	Favourable
Rent	4640	4640	0	Favourable
Administrative expenses	3850+(2700 hours*$.60 per hour) =5470	3850+(2600 hours*$.60 per hour) =5410	60	Favourable
Total expenses	107435	104850	2585	Favourable
Net operating income	14065	12150	1915	Unfavourable