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		$5,000	$160,000
Employee salaries and wages	$50,000	$1,100	$88,000
Travel expenses		$600	$19,000
Other expenses	$36,000		$34,500

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

Required (all computations pertain to the month of May):
What activity variance would Adger report with respect to its revenue? & What activity variances would Adger report with respect to each of its expenses?

PLEASE SHOW ALL WORK

Answer 1

Answer-The activity variance would Adger report with respect to its revenue =$25000 Favorable.

Explanation-

ADGER CORPORATION
Activity variances
For the month ended May
Particulars	Planning Budget	Flexible Budget	Activity Variances	Remark
	$	$	$
Customer Served	30	35
Revenue	30 customer served*$5000 per customer =$150000	35 customer served*$5000 per customer =$175000	25000	Favorable

Answer-The activity variances would Adger report with respect to each of its expenses=

ADGER CORPORATION
Activity variances
For the month ended May
Particulars	Planning Budget	Flexible Budget	Activity Variances	Remark
	$	$	$
Customer Served	35	40
Employee salaries and wages	(30 customer served*$1100 per customer)+$50000=$83000	(35 customer served*$1100 per customer)+$50000=$88500	-5500	Unfavorable
Travel expenses	30 customer served*$600 per customer=$18000	35 customer served*$600 per customer=$21000	-3000	Unfavorable
Other expenses	36000	36000	0	None
Total expenses	137000	145500	-8500	Unfavorable