1. Schriever Corporation is an oil well service company that measures its output
ID: 2340599 • Letter: 1
Question
1. Schriever Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes.
The planning budget for May was based on 36 wells serviced, but a total of 31 wells were actually serviced in May.
The activity variance for “Servicing materials” for May would have been closest to:
2. Knapper Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During January, the kennel budgeted for 2,700 tenant-days, but its actual level of activity was 2,740 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting:
The net operating income in the flexible budget for January would be closest to:
3. Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,200 units, but its actual level of activity was 6,160 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:
Data used in budgeting:
Actual results for June:
The net operating income in the planning budget for June would be closest to:
4. Ibsen Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,300 client-visits, but its actual level of activity was 3,340 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Actual results for December:
The occupancy expenses in the flexible budget for December would be closest to:
5. Prestridge 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 August.
When the company prepared its planning budget at the beginning of August, it assumed that 31 customers would have been served. However, 29 customers were actually served during August.
The activity variance for net operating income for August would have been closest to
Fixed element per month Variable Element per Well Serviced Revenue $ 4,500 Employee salaries and wages $ 57,200 $ 1,100 Servicing materials $ 600 Other expenses $ 31,000Explanation / Answer
Solution 1:
Activity variance for servicing material = (Planned activity - actual activity) * Standard price
= (36 - 31) * $600 = $3,000 F
Solution 2:
Net Operating income as per flexible budget = Revenue - Variable cost - Fixed cost
= (2740 * $37) - (2740 * $25.90) - $21,000 = $9,414
Solution 3:
Net operating income as per planning budget = Planned revenue - Planned variable cost - Planned fixed cost
= (6200 * $27.80) - (6200 * $14.70) - $60,000 = $21,220
Solution 4:
Occupancy expensed in flexible budget = $9,100 + (3340 * $2.10) = $16,114
Solution 5:
Budgeted contribution margin per customer = Revenue - Variable cost = $4,100 - $1,000 - $500 = $2,600 per customer
Activity variance for net operating income = (Budgeted activity - Actual activity) * Budgeted contribution margin per activity
= (31 - 29) * $2,600 = $5,200 U
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.