Question

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.)

Answer 1

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