Question

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December:

Cicchetti Corporation Comparison of Actual Results to Planning Budget For the Month Ended December 31
	Actual Results			Planning Budget			Variances
Customers served		40,000			35,000
Revenue ($4.8q)	$	192,400		$	168,000		$	24,400		F
Expenses:
Wages and salaries ($36,300 + $1.7q)		106,600			95,800			10,800		U
Supplies ($0.9q)		35,300			31,500			3,800		U
Insurance ($13,300)		13,700			13,300			400		U
Miscellaneous expense ($6,300 + $0.4q)		23,650			20,300			3,350		U
Total expense		179,250			160,900			18,350		U
Net operating income	$	13,150		$	7,100		$	6,050		F

Prepare the company's flexible budget performance report for December. Select each variance as favorable (F), unfavorable (U) or "None".

Answer 1

Cicchetti Corporation

Flexible budget performance report for December:

	Cicchetti Corporation
	Flexible Budget Performance Report Part 1
	For the Month Ended December 31
	Planning Budget	Flexible Budget	Activity Variances
Customer Served	35,000	40,000	NA	F/U
Revenue ($4.80q)	$168,000	$192,000	$24,000	F
Expenses:
Wages and Salaries ($36,300 + $1.7q)	$95,800	$104,300	$8,500	U
Supplies ($0.9q)	$31,500	$36,000	$4,500	U
Insurance ($13,300)	$13,300	$13,300	$0	NA
Miscellaneous Expenses ($6,300 + $0.4q)	$20,300	$22,300	$2,000	U
Total Expense	$160,900	$175,900	$15,000	U
Net Operating Income	$7,100	$16,100	$9,000	F

	Cicchetti Corporation
	Flexible Budget Performance Report Part 2
	For the Month Ended December 31
	Actual Results	Flexible Budget	Revenue and Spending Variances
Customer Served	40,000	40,000	NA
Revenue ($4.80q)	$192,400	$192,000	$400	F
Expenses:
Wages and Salaries ($36,300 + $1.7q)	$106,600	$104,300	$2,300	U
Supplies ($0.9q)	$35,300	$36,000	$700	F
Insurance ($13,300)	$13,700	$13,300	$400	U
Miscellaneous Expenses ($6,300 + $0.4q)	$23,650	$22,300	$1,350	U
Total Expense	$179,250	$175,900	$3,350	U
Net Operating Income	$13,150	$16,100	$2,950	U

Computation of Flexible budget amounts –

1. Revenues = 40,000 x $4.8q = $192,000
2. Expenses –

Wages and salaries = $36,300 +(40,000x $1.70) = $104,300

Supplies = $0.9 x 40,000 = $36,000

Insurance = $13,300

Miscellaneous Expenses = $6,300 + (40,000 x $0.4q) = $22,300