Question

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

	Fixed Element per Month			Variable Element per Liter			Actual Total for June
Revenue				$	27.00		$	160,540
Raw materials				$	6.15		$	38,430
Wages	$	7,100		$	2.90		$	24,900
Utilities	$	3,130		$	1.70		$	14,200
Rent	$	4,100					$	4,100
Insurance	$	2,850					$	2,850
Miscellaneous	$	800		$	1.85		$	11,790

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $7,100 plus $2.90 per liter of gelato sold and the actual wages for June were $24,900. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (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.)

	Via Gelato Revenue and Spending Variances For the Month Ended June 30 Revenue Expenses: Raw materials Wages Utilities Rent Insurance Miscellaneous Total expense Net operating income

Answer 1

Solution

Via Gelato
Revenues and Spending Variance
For the Month ended June 30
Revenue	$    6,860.00	U
Expenses:
Raw material	$      (300.00)	U
Wages	$        180.00	F
Utilities	$      (530.00)	U
Rent	$                 -	None
Insurance	$                 -	None
Miscellaneous	$        480.00	F
Total Expenses	$      (170.00)	U
Net Operating Income	$    7,030.00	U

Working

	A=B +(C x D)	C= Units	B= Fixed cost	D= Variable revenue/Cost	E= Actual	F=E-A = variance
Revenue	$ 167,400	6200		$ 27.00	$ 160,540	-$ 6,860
Expenses:		6200
Raw material	$ 38,130	6200		$ 6.15	$ 38,430	$ 300
Wages	$ 25,080	6200	$ 7,100	$ 2.90	$ 24,900	-$ 180
Utilities	$ 13,670	6200	$ 3,130	$ 1.70	$ 14,200	$ 530
Rent	$ 4,100	6200	$ 4,100		$ 4,100	$ 0
Insurance	$ 2,850	6200	$ 2,850		$ 2,850	$ 0
Miscellaneous	$ 12,270	6200	$ 800	$ 1.85	$ 11,790	-$ 480
Total Expenses	$ 96,100				$ 96,270	$ 170
Net Operating Income	$ 71,300				$ 64,270	-$ 7,030