Question

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	6,100		$	223,500
Employee salaries and wages	$	68,000	$	1,500		$	126,000
Travel expenses			$	600		$	20,400
Other expenses	$	47,000				$	44,300

When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.

1. What amount of revenue would be included in Adger’s flexible budget for May?

2. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?

3. What amount of travel expenses would be included in Adger’s flexible budget for May?

4. What amount of other expenses would be included in Adger’s flexible budget for May?

5. What net operating income would appear in Adger’s flexible budget for May?

6. What is Adger’s revenue variance 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.)

7. What is Adger’s employee salaries and wages spending variance 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.)

8. What is Adger’s travel expenses spending variance 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.)

9. What is Adger’s other expenses spending variance 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.)

10. What amount of revenue would be included in Adger’s planning budget for May?

11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?

12. What amount of travel expenses would be included in Adger’s planning budget for May?

13. What amount of other expenses would be included in Adger’s planning budget for May?

14. What activity variance would Adger report in May with respect to its revenue? (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.)

15. What activity variances would Adger report with respect to each of its expenses 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.)

15. What activity variances would Adger report with respect to each of its expenses 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

								40			35
					actual	revenue and spending	variance	Flexible	Activity variance		planned
					result	variance		budget			budget
fixed	variable
	6,100	Revenue			223,500	20,500	U	244000	30500	F	213500
		Expenses
68,000	1,500	employee salaries and wages			126,000	2,000	F	128000	7500	U	120500
	600	travel expenses			20,400	3,600	F	24000	3000	U	21000
47,000		other expenses			44,300	2,700	F	47,000	0	N	47,000
		total expense			190,700	8,300	F	199000	10500	U	188500
		net income			32,800	12,200	U	45000	20000	F	25000
		1)	Revenue-Flexible budget				244000
		2)	Employees salaries and wages-flexible budget				128000
		3)	Travel expense -Flexible budget				24000
		4)	other expense -Flexible budget				47,000
		5)	operting income -flexible budget				45000
		6)	revenue variance				20,500	U
		7)	employee salaries and wages			spending variance		2,000	F
		8)	travel expense -spending variance					3,600	F
		9)	other expenses spending variance					2,700	F
		10)	revenue-planning budget					213500
		11)	employee salaries and wages			planning budget		120500
		12)	travel expense -planning budget					21000
		13)	other expenses planning budget					47,000
		14)	revenue -activity variance					30500	F
		15)	employee salaries and wages			activity variance		7500	U
			travel expense -activity variace					3000	U
			other expenses activity variance					0	N