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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			$	5,200		$	170,000
Employee salaries and wages	$	51,000	$	1,200		$	92,700
Travel expenses			$	650		$	20,600
Other expenses	$	30,000				$	29,000

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

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

Answer 1

A	B	C	D	E	f		G	H	I	J
	Fixed Element		Variable Element per Customer Served		Actual Total		Budgeted Cost	Per Unit	Per Unit	Notes
	per Month				for May		May	Actuals	Standard
							30 Customer
Revenue			$	5,200	$	170,000	156,000	4,857	5,200	1
Employee salaries and wages	$	51,000	$	1,200	$	92,700	87,000	2,649	3,090	2
Travel expenses			$	650	$	20,600	19,500	589	650	3
Other expenses	$	30,000			$	29,000	30,000	857	1,000	4
Answer 11
Amount of employee salaries and wages would be included in Adger’s planning budget for May?
Answer	$87,000	Refer to point 2
Answer -12
Amount of travel expenses would be included in Adger’s planning budget for May?
Answer	$19,500	Refer to point 3
Answer -13
Amount of other expenses would be included in Adger’s planning budget for May?
Answer	$30,000	Refer to point 4
Answer -14
Activity variance would Adger report in May with respect to its revenue
Contribution per customer =Revenue per customer -Variable Salary Expense-Variable Travel Expense
	=5200-40-650		Refer to note 2 and 3
	4510
(Budgeted Customer Served-Actual Customer served)*Contribution Per Customer
	-16750	Favourable
Answer -15
Activity variance would Adger report in May with respect to each expenses
Employee salaries and wages spending variance	=(Budgeted Price -Actual Price) * Actual Quantity
	=(3090-2649)*35
	15435	Favourable		Refer to col. H &I above
Travel Expenses Spending Variance	=(650-589)*35
	2135	Favourable		Refer to col. H &I above
Other Expenses	=(1000-857)*35
	5005	Favourable		Refer to col. H &I above