Question

1. Zacks Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for December.

		Fixed Element per Month	Variable Element per Customer Served	Actual Total for December
	Revenue.......................................		$5,400	$126,800
	Employee salaries and wages........	$44,500	$1,300	$73,400
	Travel expenses............................		$600	$13,400
	Other expenses.............................	$41,900		$42,700

When the company prepared its planning budget at the beginning of December, it assumed that 25 customers would have been served. However, only 23 customers were served during December.

Required:

Prepare a performance report showing and interpreting the company’s activity and revenue and spending variances for December. Indicate in each case whether the variance is favorable (F) or unfavorable (U) that includes:

a. The Planning Budget

b. The Flexible Budget

c. Activity Variances

d. Revenue and Spending Variances

e. Explain the meaning of this report.

Answer 1