Adger Corporation is a service company that measures its output based on the num
ID: 2447354 • Letter: A
Question
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below
When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.
What amount of employee salaries and wages would be included in Adgers flexible budget for May?
What amount of travel expenses would be included in Adgers flexible budget for May?
What amount of other expenses would be included in Adgers flexible budget for May?
What is Adgers revenue variance for May?
What is Adgers employee salaries and wages spending variance for May?
What is Adgers travel expenses spending variance for May?
What is Adgers other expenses spending variance for May?
What amount of travel expenses would be included in Adgers planning budget for May?
What amount of other expenses would be included in Adgers planning budget for May?
What activity variance would Adger report in May with respect to its revenue?
What activity variances would Adger report with respect to each of its expenses?
Fixed Elementper Month Variable Element per Customer Served Actual Total
for May Revenue $ 5,000 $ 160,000 Employee salaries and wages $ 50,000 $ 1,100 $ 88000 Travel expenses $ 600 $ 19,000 Other expenses $ 36,000 $ 34,500
Explanation / Answer
Answer:
Flexible Budget ----According to CIMA, “A Flexible Budget is defined as a budget which, by recognizing the difference between fixed, semi-variable and variable costs is designed to change in relation to the level of activity attained”
Adger Corporation
Statement of Master/Planning Budget, Flexible Budget (at Standard Cost) based on Actual Result and Actual Results for the month of May
Particulars
Master/Planning Budget
Flexible Budget (at Standard Cost)
Actual Result
(Based on 30 Customer Served Per Month)
Per Unit
(Based on actual result 35 Customer served per month)
(Actual result 35 Customer served per month)
A.
Revenue
$150,000
$5,000
$175,000
$160,000
B.
Employee Salaries and Wages (Fixed)
$50,000
$1,428.57
$50,000
C.
Employee Salaries and Wages (Variable)
$33,000
$1,100
$38,500
D.
Total Employee Salaries and Wages
$83,000
$2,528.57
$88,500
$88,000
E.
Travel Expenses
$18,000
$600
$21,000
$19,000
F.
Other Expenses
$36,000
$1,028.57
$36,000
$34,500
G.
TOTAL COST (D+E+F)
$137,000
$4,157.14
$145,500
$141,500
H.
NET PROFIT (A - G)
$13,000
$842.86
$29,500
$18,500
Here is the answers of your questions:
1.
What amount of revenue would be included in Adgers flexible budget for May?
$175,000
2.
What amount of employee salaries and wages would be included in Adgers flexible budget for May?
$88,500
(Fixed $50,000 + Variable $38,500)
3.
What amount of travel expenses would be included in Adgers flexible budget for May?
$21,000
4.
What amount of other expenses would be included in Adgers flexible budget for May?
$36,000
5.
What net operating income would appear in Adgers flexible budget for May?
$29,500
6.
What is Adgers revenue variance for May?
Actual Customer Server (Standard Rate – Actual Rate) = 35 ($5,000 - $4,571.43) = $15,000 (Un-favorable)
7.
What is Adgers employee salaries and wages spending variance for May?
Standard Cost for Actual Output – Actual Cost = $88,500 - $88,000 = $500 (Favorable)
8.
What is Adgers travel expenses spending variance for May?
Standard Cost for Actual Output – Actual Cost = $21,000 - $19,000 = $2,000 (Favorable)
9.
What is Adgers other expenses spending variance for May?
Standard Cost for Actual Output – Actual Cost = $36,000 - $34,500 = $1,500 (Favorable)
10.
What amount of revenue would be included in Adgers planning budget for May?
$13,000
11.
What amount of employee salaries and wages would be included in Adgers planning budget
for May?
$83,000
12.
What amount of travel expenses would be included in Adgers planning budget for May?
$18,000
13.
What amount of other expenses would be included in Adgers planning budget for May?
$36,000
14.
What activity variance would Adger report in May with respect to its revenue?
An Activity Variance is the difference between the level of activity assumed in the planning (Master) budget and the actual level of activity used in the flexible budget.
Activity Variance (Revenue) = Revenue as per flexible Budget – Revenue as per Master Budget = $175,000 - $150,000 = $25,000 (Favorable)
15.
What activity variances would Adger report with respect to each of its expenses?
Activity Variance (Expenses) = Total Expenses as per flexible Budget – Total Expenses as per Master Budget = $145,500 - $137,000 = $8,500 (Un-favorable)
With respect to each expenses
Employee Salaries and Wages = $88,500 - $83,000 = $5,500 (Unfavorable)
Travel Expenses = $21,000 - $18,000 = $3,000 (Unfavorable)
Other Expenses = $36,000 - $36,000 = $0
Adger Corporation
Statement of Master/Planning Budget, Flexible Budget (at Standard Cost) based on Actual Result and Actual Results for the month of May
Particulars
Master/Planning Budget
Flexible Budget (at Standard Cost)
Actual Result
(Based on 30 Customer Served Per Month)
Per Unit
(Based on actual result 35 Customer served per month)
(Actual result 35 Customer served per month)
A.
Revenue
$150,000
$5,000
$175,000
$160,000
B.
Employee Salaries and Wages (Fixed)
$50,000
$1,428.57
$50,000
C.
Employee Salaries and Wages (Variable)
$33,000
$1,100
$38,500
D.
Total Employee Salaries and Wages
$83,000
$2,528.57
$88,500
$88,000
E.
Travel Expenses
$18,000
$600
$21,000
$19,000
F.
Other Expenses
$36,000
$1,028.57
$36,000
$34,500
G.
TOTAL COST (D+E+F)
$137,000
$4,157.14
$145,500
$141,500
H.
NET PROFIT (A - G)
$13,000
$842.86
$29,500
$18,500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.