Question

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

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	20,800		$	15.00
Parts and supplies				$	7.60
Equipment depreciation	$	2,710		$	0.30
Truck operating expenses	$	5,750		$	1.50
Rent	$	4,610
Administrative expenses	$	3,900		$	0.60

For example, wages and salaries should be $20,800 plus $15.00 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,700 repair-hours. The company expects its sales to be $44.00 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.)

	Jake’s Roof Repair Activity Variances For the Month Ended May 31 Revenue Expenses: Wages and salaries Parts and supplies Equipment depreciation Truck operating expenses Rent Administrative expenses Total expense Net operating income

Answer 1

Jake's roof Repair
Activity Variance
For the month ended May 31
	Activity Variance
Revenue	$                               4,400	U
Expenses:
Wages and salaries	$                               1,500	F
Parts and supplies	$                                   760	F
Equipment depreciation	$                                     30	F
Truck operating expenses	$                                   150	F
Rent	$                                      -	None
Administrative expenses	$                                     60	F
Total expense	$                               2,500	F
Net operating Income	$                               1,900	U
Workings:
Jake's roof Repair
Activity Variance
For the month ended May 31
		Flexible Budget	Planning Budget	Activity Variance
Repair - hours	(q)	2,700	2,800
Revenue	($44 X q)	1,18,800	1,23,200	$       4,400	U
Expenses:
Wages and salaries	[$20800 + ($15 X q)]	$     61,300	$     62,800	$       1,500	F
Parts and supplies	($7.60 X q)	$     20,520	$     21,280	$           760	F
Equipment depreciation	[$2710 + ($0.30 X q)]	$       3,520	$       3,550	$             30	F
Truck operating expenses	[$5750 + ($1.50X q)]	$       9,800	$       9,950	$           150	F
Rent	$                               4,610	$       4,610	$       4,610	$              -	None
Administrative expenses	[$3900 + ($0.60 X q)]	$       5,520	$       5,580	$             60	F
Total expense		$ 1,05,270	$ 1,07,770	$       2,500	F
Net operating Income		$     13,530	$     15,430	$       1,900	U