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				$	7.70
Equipment depreciation	$	2,750		$	0.30
Truck operating expenses	$	5,760		$	1.70
Rent	$	4,610
Administrative expenses	$	3,820		$	0.50

For example, wages and salaries should be $21,400 plus $15.00 per repair-hour. The company expected to work 2,600 repair-hours in May, but actually worked 2,500 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

	Activity variance
Revenues	$            5,100.00	U
Expenses:
Wages & Salaries	$            1,500.00	F
Part & Supplies	$                770.00	F
Equipment depreciation	$                  30.00	F
Truck Operating expenses	$                170.00	F
Rent	$                         -	None
Administrative expense	$                  50.00	F
Total Expenses	$            2,520.00	F
Net Operating Income	$            2,580.00	U

		WORKING COLUMNS					Flexible Budget	Activity variance		Planning Static Budget
Repair hours							2,500			2,600
Revenues				$    51.00			$           127,500.00	$            5,100.00	U	$        132,600.00
Expenses:
Wages & Salaries	(	$      21,400.00	)	$    15.00	x 2500 or 2600		$             58,900.00	$            1,500.00	F	$          60,400.00
Part & Supplies	(	$                      -	)	$      7.70	x 2500 or 2600	)	$             19,250.00	$                770.00	F	$          20,020.00
Equipment depreciation	(	$         2,750.00	+	$      0.30	x 2500 or 2600	)	$               3,500.00	$                  30.00	F	$             3,530.00
Truck Operating expenses	(	$         5,760.00	+	$      1.70	x 2500 or 2600	)	$             10,010.00	$                170.00	F	$          10,180.00
Rent	(	$         4,610.00	+	$           -	x 2500 or 2600		$               4,610.00	$                         -	None	$             4,610.00
Adminsitrative expense	(	$         3,820.00	)	$      0.50	x 2500 or 2600		$               5,070.00	$                  50.00	F	$             5,120.00
Total Expenses		$      38,340.00		$    25.20			$           101,340.00	$            2,520.00	F	$        103,860.00
Net Operating Income							$             26,160.00	$            2,580.00	U	$          28,740.00