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 $ 32.00(variable) $ 192,540 (total)

Raw materials $ 6.65(variable) $ 41,930 (total)

Wages $ 7,600(fixed) $ 3.40(variable) $ 28,100 (total)

Utilities $ 3,630(fixed) $ 2.20 (variable) $ 17,500 (total)

Rent $ 4,600 (fixed) $ 4,600 (total)

Insurance $ 3,350(fixed) $ 3,350 (total)

Miscellaneous $ 850(fixed) $ 2.35 (variable) $ 15,190 (total)

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 $7,600 plus $3.40 per liter of gelato sold and the actual wages for June were $28,100. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters.

Required:

1. What is the amount of revenue that would be included in the flexible budget for Via Gelato in June?

2. What is the total amount of fixed expense per month in Via Gelato's flexible budget?

3. What is the variable expense per liter in Via Gelato's flexible budget for all expense lines combined? What is the total variable expense for the month in Via Gelato's flexible budget?

4. What is the Net Operating Income in Via Gelato's flexible budget?

5. What is the Via Gelato's actual Net Operating Income for the month?

6. Using your answers from steps 4 and 5, 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

Flexible budget: Units 6200 Sales 198400 6200*32 Less: Expenses: RM 41230 6200*6.65 Wages 28680 6200*3.4 +7600 Utilities 17270 6200*2.2+3630 rent 4600 Insurance 3350 Miscel 15420 6200*2.35+850 Total Expenses 110550 NOI 87850 1. flexible budget - revenues $198400 2. flexible budget - fixed expense $(7600+3630+4600+3350+850)=$20030 3. flexible budget - variable expenses per liter = $(6.65+3.40+2.20+2.35)= $14.60 Total variable expenses = 6200*14.60=$90520 4. NOI (flexible budget) = $87850 5. Actual NOI = 81870 ie. (192540-41930-28100-17500-4600-3350-15190) 6. Revenue and spending variance = 81870 - 87850 = $5980 U

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.