Question

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

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	20,500		$	15.00
Parts and supplies				$	7.10
Equipment depreciation	$	2,740		$	0.35
Truck operating expenses	$	5,790		$	1.80
Rent	$	4,640
Administrative expenses	$	3,800		$	0.70

For example, wages and salaries should be $20,500 plus $15.00 per repair-hour. The company expected to work 2,500 repair-hours in May, but actually worked 2,400 repair-hours. The company expects its sales to be $50.00 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

Answer -

Jake’s Roof Repair
Activity Variances
For the Month Ended May 31

	Flexible Budget	Planning Budget	Activity Variances
Repair-hours	2400 [Given in question]	2500 [Given in question]	-
Revenue	$120000 [2400 repair-hours * $50]	$125000 [2500 repair-hours * $50]	$5000 U [$125000 - $120000]
Expenses:	-	-	-
Wages and salaries	$56500 [$20500 + ($15 * 2400)]	$58000 [$20500 + ($15 * 2500)]	$1500 F [$58000 - $56500]
Parts and supplies	$17040 [$7.10 * 2400]	$17750 [$7.10 * 2500]	$710 F [$17750 - $17040]
Equipment depreciation	$3580 [$2740 + ($0.35 * 2400)]	$3615 [$2740 + ($0.35 * 2500)]	$35 F [$3615 - $3580]
Truck operating expenses	$10110 [$5790 + ($1.80 * 2400)]	$10290 [$5790 + ($1.80 * 2500)]	$180 F [$10290 - $10110]
Rent	$4640 [Given in question]	$4640 [Given in question]	None
Administrative expenses	$5480 [$3800 + ($0.70 * 2400)]	$5550 [$3800 + ($0.70 * 2500)]	$70 F [$5550 - $5480]
Total expense	$97350	$99845	$2495 F [$99845 - $97350]
Net operating income	$22650	$25155	$2505 U [$25155 - $22650]