Question

In: Accounting

Jake’s Roof Repair has provided the following data concerning its costs: Fixed Cost per Month Cost...

Jake’s Roof Repair has provided the following data concerning its costs:

Fixed Cost
per Month
Cost per
Repair-Hour
Wages and salaries $ 20,900 $ 15.00
Parts and supplies $ 7.60
Equipment depreciation $ 2,790 $ 0.55
Truck operating expenses $ 5,790 $ 1.80
Rent $ 4,660
Administrative expenses $ 3,890 $ 0.70

For example, wages and salaries should be $20,900 plus $15.00 per repair-hour. The company expected to work 3,000 repair-hours in May, but actually worked 2,900 repair-hours. The company expects its sales to be $48.00 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.)

Solutions

Expert Solution

Jake's Roof Repair
Activity Variances
For the month ended May 31
$
Revenue                      4,800.00 U
Expenses:
Wages and Salaries                      1,500.00 F
Parts and supplies                          760.00 F
Equipment depreciation                            55.00 F
Truck Operating Expenses                          180.00 F
Rent                                   -   None
Administrative Expenses                            70.00 F
Total Expense                      2,565.00 F
Net Operating Income                      2,235.00 U
Explanations
Jake's Roof Repair
Activity Variances
For the month ended May 31
Planning Budget Flexible Budget Activity Variances
($) ($)
Repairs - hours (q)                      3,000.00                     2,900.00
Revenue (48*q)                  144,000.00                 139,200.00                         4,800.00 U
Expenses:
Wages and Salaries [20,900+(15*q)]                    65,900.00                   64,400.00                         1,500.00 F
Parts and supplies (7.60*q)                    22,800.00                   22,040.00                            760.00 F
Equipment depreciation [2,790+(0.55*q)]                      4,440.00                     4,385.00                               55.00 F
Truck Operating Expenses [5,790+(1.80*q)]                    11,190.00                   11,010.00                            180.00 F
Rent                      4,660.00                     4,660.00                                      -   None
Administrative Expenses [3,890+(0.70*q)]                      5,990.00                     5,920.00                               70.00 F
Total Expense                  114,980.00                 112,415.00                         2,565.00 F
Net Operating Income                    29,020.00                   26,785.00                         2,235.00 U

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