Via Gelato is a popular neighborhood gelato shop. The company has provided the f

Question

Via Gelato is a popular neighborhood gelato shop. The company has provided the following data concerning its operations: Fixed Element per Month Variable Element per Liter Actual Total for June Revenue $ 17.00 $ 99,540 Raw materials $ 5.15 $ 32,730 Wages $ 6,100 $ 1.90 $ 17,900 Utilities $ 2,130 $ 0.70 $ 7,000 Rent $ 3,100 $ 3,100 Insurance $ 1,850 $ 1,850 Miscellaneous $ 700 $ 0.85 $ 5,800 While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $6,100 plus $1.90 per liter of gelato sold and the actual wages for June were $17,900. Via Gelato expected to sell 6,100 liters in June, but actually sold 6,300 liters. Required: What is the overall revenue and spending variance (the revenue and spending variance for the Net Income column) for Via Gelato in June? (Input all amounts as positive values. Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Explanation / Answer

Actual Flexible budget Revenue 99540 107100 Expenses: Raw materials 32730 32445 Wages 17900 18070 Utilities 7000 6540 Rent 3100 3100 Insurance 1850 1850 Miscellaneous 5800 6055 Total expenses 68380 68060 Net income 31160 39040 Overall revenue and spending variance = 39040-31160 = $7880 U

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