Hemphill Corporation uses customers served as its measure of activity. During Ju

Question

      Hemphill Corporation uses customers served as its measure of activity. During June, the company budgeted for 20,000 customers, but actually served 19,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

Fixed element per month

Variable element per customer

Revenue

-

$ 4.50

Wages and salaries

$ 23,900

$ 1.40

Supplies

$ 0

$ 0.80

Insurance

$ 5,700

$ 0.00

Miscellaneous

$ 5,000

$ 0.40

Actual results for June:

Revenue

$ 85,400

Wages and salaries

$ 52,700

Supplies

$ 17,500

Insurance

$ 5,500

Miscellaneous

$ 12,200

   

Required:
1. Prepare the company's flexible budget performance report for June. Label each variance as favorable (F) or unfavorable (U).

2. Comment on the results.

Fixed element per month

Variable element per customer

Revenue

-

$ 4.50

Wages and salaries

$ 23,900

$ 1.40

Supplies

$ 0

$ 0.80

Insurance

$ 5,700

$ 0.00

Miscellaneous

$ 5,000

$ 0.40

Explanation / Answer

Comment: Due to unfavorable wages / salaries, and supplies, the operating income became unfavorable.

Actual
Results (1) Flexible-Budget
Variances
(2) = (1)

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