Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,400 pounds of oysters in August. The company’s flexible budget for August appears below: Quilcene Oysteria Flexible Budget For the Month Ended August 31 Actual pounds (q) 7,400 Revenue ($4.15q) $ 30,710 Expenses: Packing supplies ($0.30q) 2,220 Oyster bed maintenance ($3,600) 3,600 Wages and salaries ($2,200 + $0.30q) 4,420 Shipping ($0.55q) 4,070 Utilities ($1,200) 1,200 Other ($410 + $0.01q) 484 Total expense 15,994 Net operating income $ 14,716 The actual results for August appear below: Quilcene Oysteria Income Statement For the Month Ended August 31 Actual pounds 7,400 Revenue $ 27,100 Expenses: Packing supplies 2,390 Oyster bed maintenance 3,460 Wages and salaries 4,830 Shipping 3,800 Utilities 1,010 Other 1,104 Total expense 16,594 Net operating income $ 10,506 Required: Compute the company’s revenue and spending variances for August. (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

Ans:

Revenue and spending variance is the difference between flexibe budget prepared for actual quantity and actual result for that period. Revenue and spending variance help to analyse variation between actual and expected so that organisation can focus on items which has unfavorable variance and try to reduce them for upcoming period.

Flexible budget performance report of Quilcene Oysteria Farms for august month is as folows:

Quilcene Oysteria Farms
Flexible Budget Performance Report
For August month
Particulars	Flexible Budget	Actual Results	Revenue and Spending variance
Quantity	7400	7400
Revenue	30710	27100	3610	U
Expenses:
Packing Supplies	2220	2390	170	U
Oyster bed Maintenance	3600	3460	140	F
Wages and salaries	4420	4830	410	U
Shipping	4070	3800	270	F
Utilities	1200	1010	190	F
Other Expenses	484	1104	620	U
Total Expenses	15994	16594	600	U
Net Operating Income	14716	10506	4210	U