Question

In: Accounting

Budget Variance Analysis Hertzler Corporation uses customers served as its measure of activity. During November, the...

Budget Variance Analysis

Hertzler Corporation uses customers served as its measure of activity. During November, the company budgeted for 23,000 customers, but actually served 25,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:

Revenue: $7.25q
Wages and salaries: $30,500 + $2.30q
Supplies: $0.80q
Insurance: $6,200
Miscellaneous: $8,750 + $0.30q
The company reported the following actual results for November:

Revenue $ 185,000
Wages $ 95,000
Supplies $ 19,500
Insurance $ 6,500
Misc $ 15,000



  

Required:

Prepare a net income report showing the company's revenue and spending variances for November. Label each variance as favorable (F) or unfavorable (U). Make sure it is formatted based on an income statement and show the actual and the budgeted side by side. (2 questions in 1 – Create Budget, then Compare Budget with Actual results, which will allow to figure the amount of variance and if it is Favorable or Unfavorable)

Solutions

Expert Solution

Ans. HERTZLER    CORPORATION
Revenue and Spending Varinance
For the Month Ended November 30
Actual Results Revenue & Spending variance Flexible Budget
Customers served 25,000 25,000
Revenue $185,000 $3,750 F $181,250
Expenses:
Wages and salaries $95,000 $7,000 U $88,000
Supplies $19,500 -$500 F $20,000
Insurance $6,500 $300 U $6,200
Miscellaneous expense $15,000 -$1,250 F $16,250
Total expenses $136,000 $5,550 U $130,450
Net operating income $49,000 -$1,800 U $50,800
*Flexible budget is prepared on the basis of actual units.
*Fixed expenses remain same as planning budget.
*Calculation of Flexible budget:
Flexible Budget
Customers served 25,000
Revenue $7.25 * 25,000
Expenses:
Wages and salaries $30,500 + (25,000 * $2.30)
Supplies $0.80 * 25,000
Insurance $6,200
Miscellaneous expense $8,750 + (25,000 * $0.30)
Revenue & Spending variance   =   Actual results - Flexible budget
*Increase in revenue or net operating income from flexible budget to actual results =   Favorable.
*Decrease in revenue or net operating income from flexible budget to actual results =   Unfavorable.
*Increase in expenses from flexible budget to actual results =   Unfavorable.
*Decrease in expenses from flexible budget to actual results =   Favorable.

Related Solutions

Crovo Corporation uses customers served as its measure of activity. During December, the company budgeted for...
Crovo Corporation uses customers served as its measure of activity. During December, the company budgeted for 42,000 customers, but actually served 44,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Fixed element per month Variable element per customer   Revenue $ 2.60             Wages and salaries $ 20,300         $ 0.89             Supplies $ 0         $ 0.54             Insurance $ 7,300         $ 0.00             Miscellaneous $...
Manic Corporation uses customers served as its measure of activity. During June, the company budgeted for...
Manic Corporation uses customers served as its measure of activity. During June, the company budgeted for 20,000 customers, but actually served 19,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June: Data used in budgeting: fixed Element per month Variable Element per customer revenue $4.50 wages and Salaries $23,900 $1.40 Supplies 0 $0.80 Insurance $5,700 $0.00 Miscellaneous $5,000 $0.40 Actual results for June: Revenue $85,400 wages and salaries...
Crovo Corporation uses customers served as its measure of activity. During December, the company budgeted for...
Crovo Corporation uses customers served as its measure of activity. During December, the company budgeted for 39,000 customers, but actually served 41,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Fixed element per month Variable element per customer   Revenue $ 2.50             Wages and salaries $ 20,000         $ 0.86             Supplies $ 0         $ 0.51             Insurance $ 7,000         $ 0.00             Miscellaneous $...
Abel Corporation uses customers served as its measure of activity. During February, the company budgeted for...
Abel Corporation uses customers served as its measure of activity. During February, the company budgeted for 36,400 customers, but actually served 27,600 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served: Revenue: $4.90q Wages and salaries: $34,600 + $1.52q Supplies: $0.92q Insurance: $11,800 Miscellaneous expenses: $7,800 + $0.44q The company reported the following actual results for February: Revenue $ 147,800 Wages and salaries $ 69,400 Supplies $ 15,800...
Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for...
Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for 36,800 customers, but actually served 27,200 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served: Revenue: $5.30q Wages and salaries: $35,000 + $1.64q Supplies: $1.04q Insurance: $12,200 Miscellaneous expenses: $8,200 + $0.48q The company reported the following actual results for February: Revenue $ 155,800 Wages and salaries $ 69,800 Supplies $ 16,200...
Bellamy Corporation uses customers served as its measure of activity. The company bases its budgets on...
Bellamy Corporation uses customers served as its measure of activity. The company bases its budgets on the following information: Revenue should be $3.20 per customer served. Wages and salaries should be $21,000 per month plus $0.80 per customer served. Supplies should be $0.70 per customer served. Insurance should be $5,300 per month. Miscellaneous expenses should be $3,100 per month plus $0.10 per customer served. The company reported the following actual results for October: Customers served 22,000 Revenue $ 73,300 Wages...
Bickel Corporation uses customers served as its measure of activity. The following report compares the planning...
Bickel Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of November: Bickel Corporation Comparison of Actual Results to Planning Budget For the Month Ended November 30 Actual Results Planning Budget Variances Customers served 36,000 35,000 Revenue ($3.40q) $ 122,300 $ 119,000 $ 3,300 F Expenses: Wages and salaries ($23,500 + $1.25q) 68,500 67,250 1,250 U Supplies ($0.65q) 20,450 22,750 2,300 F Insurance ($5,400) 5,400...
Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning...
Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December: Cicchetti Corporation Comparison of Actual Results to Planning Budget For the Month Ended December 31 Actual Results Planning Budget Variances   Customers served 29,000   28,000     Revenue (3.40q) $ 98,800 $ 95,200 $ 3,600 F   Expenses:      Wages and salaries ($22,800 + $1.18q) 57,020 55,840 1,180 U      Supplies ($0.58q) 14,540 16,240 1,700 F      Insurance ($4,700) 4,700...
Rundell Corporation uses customers served as its measure of activity. The following report compares the planning...
Rundell Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of July. Wages and Supplies are purely variable costs while Insurance is all fixed cost. Miscellaneous expense is a mixed cost with $2,500 being the fixed component of the total amount planned. Rundell Corporation Comparison of Actual Results to Planning Budget For the Month Ended July 31 Actual Results Planning Budget Customers Served 4,260 5,000...
Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning...
Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December: Cicchetti Corporation Comparison of Actual Results to Planning Budget For the Month Ended December 31 Actual Results Planning Budget Variances   Customers served 38,000   37,000     Revenue (3.50q) $ 133,800 $ 129,500 $ 4,300 F   Expenses:      Wages and salaries ($23,700 + $1.27q) 71,960 70,690 1,270 U      Supplies ($0.67q) 22,290 24,790 2,500 F      Insurance ($5,600) 5,600...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT