Question

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

Fixed Cost per Month

Cost per Repair-Hour

Wages and salaries	$	21,400		$	15.00
Parts and supplies				$	7.60
Equipment depreciation	$	2,740		$	0.40
Truck operating expenses	$	5,730		$	1.60
Rent	$	4,670
Administrative expenses	$	3,810		$	0.60

   

For example, wages and salaries should be $21,400 plus $15.00 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 $51.00 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

Formula sheet

A	B	C	D	E	F	G	H
2
3		The activity variance is the difference in cost or revenue item between static and flexible budget.
4		It is due to different level of activities in planning budget and the actual level of activity.
5
6			Fixed Cost per Month	Cost per Repair-Hour
7		Wages and salaries	21400	15
8		Parts and supplies	0	7.6
9		Equipment depreciation	2740	0.4
10		Truck operating expenses	5730	1.6
11		Rent	4670	0
12		Administrative expenses	3810	0.6
13
14		Budgeted repair hours	2700
15		Actual repair hours	2600
16
17		Company Sales	51	per repair hour
18
19			Static Budget	Flexible budget	Activity Variances	Favorable Unfavorable
20		Revenue	=D14*D17	=D15*D17	=E20-D20	U
21		Expenses
22		Wages and salaries	=D7+E7*$D$14	=D7+E7*$D$15	=E22-D22	F
23		Parts and supplies	=D8+E8*$D$14	=D8+E8*$D$15	=E23-D23	F
24		Equipment depreciation	=D9+E9*$D$14	=D9+E9*$D$15	=E24-D24	F
25		Truck operating expenses	=D10+E10*$D$14	=D10+E10*$D$15	=E25-D25	F
26		Rent	=D11+E11*$D$14	=D11+E11*$D$15	=E26-D26	None
27		Administrative expenses	=D12+E12*$D$14	=D12+E12*$D$15	=E27-D27	F
28		Total Expenses	=SUM(D22:D27)	=SUM(E22:E27)	=E28-D28	F
29		Operating Profit	=D20-D28	=E20-E28	=E29-D29	U
30