Question

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	5,400		$	226,000
Employee salaries and wages	$	61,000	$	2,200		$	158,700
Travel expenses			$	530		$	20,700
Other expenses	$	40,000				$	38,000

When preparing its planning budget the company estimated that it would serve 40 customers per month; however, during May the company actually served 45 customers.

5. What net operating income would appear in Adger’s flexible budget for May?

6. What is Adger’s revenue variance 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.

7. What is Adger’s employee salaries and wages spending variance for May?

8. What is Adger’s travel expenses spending variance for May

9. What is Adger’s other expenses spending variance for May?

10. What amount of revenue would be included in Adger’s planning budget for May?

11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?

12. What amount of travel expenses would be included in Adger’s planning budget for May?

13. What amount of other expenses would be included in Adger’s planning budget for May?

14. What activity variance would Adger report in May with respect to its revenue?

15. What activity variances would Adger report with respect to each of its expenses 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

Ques 1
revenue
variable element per customer served	5400
Actual activity	45
Amount in flexible budget	243000
Ques 2
Employee salaries and wages
variable element per customer served	2200
Actual activity	45
Variable portion of the amount	99000
Fixed element per month	61000
amoun in flexible budget	160000
Ques 3
Travel expenses
variable element per customer served	530
Actual activity	45
Amount in flexible budget	23850
Ques 4
Other expenses	40000
Ques 5
Revenue		243000
Employee salaries and wages	160000
Travel expenses	23850
Other expenses	40000	223850
Net operating income		19150
Ques 6
Actual results	Revenue Variance	Flexible budget
226000	17000	U	243000
Ques 7
Actual results	Spending Variance	Flexible budget
158700	1300	F	160000
Ques 8
Actual results	Spending Variance	Flexible budget
20700	3150	F	23850
Ques 9
Actual results	Spending Variance	Flexible budget
38000	2000	F	40000
Ques 10
revenue
variable element per customer served	5400
Planned level of Activity	40
Amount in Planning budget	216000
Ques 11
Employee salaries and wages
variable element per customer served	2200
Planned level of Activity	40
Variable portion of the amount	88000
Fixed element per month	61000
Amount in Planning budget	149000
Ques 12
Travel expenses
variable element per customer served	530
Planned level of Activity	40
Amount in Planning budget	21200
Ques 13
Other expenses	40000
Ques 14
Flexible budget	Activity Variance	Planning budget
243000	27000	F	216000
Ques 15
	Flexible budget	Activity Variance	Planning budget
Employee salaries and wages	160000	11000	U	149000
Travel expenses	23850	2650	U	21200
Other expenses	40000	0	None	40000