2 Olympia Bivalve farms and sells oysters in the Pacific Northwest. The company

Question

2

Olympia Bivalve farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,500 pounds of oysters in July. The company’s flexible budget for July appears below:

Olympia Bivalve
Flexible Budget
For the Month Ended July 31

  Actual pounds (q)

7,500

  Revenue ($4.15q)

$

31,125

  Expenses:

      Packing supplies ($0.35q)

2,625

      Oyster bed maintenance ($3,400)

3,400

      Wages and salaries ($2,100 + $0.30q)

4,350

      Shipping ($0.75q)

5,625

      Utilities ($1,260)

1,260

      Other ($400 + $0.01q)

475

  Total expense

17,735

  Net operating income

$

13,390

The actual results for July appear below:

Olympia Bivalve
Income Statement
For the Month Ended July 31

  Actual pounds

7,500

  Revenue

$

26,600

  Expenses:

      Packing supplies

2,795

      Oyster bed maintenance

3,260

      Wages and salaries

4,760

      Shipping

5,355

      Utilities

1,070

      Other

1,095

  Total expense

18,335

  Net operating income

$

8,265

Required:

Compute the company’s revenue and spending variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Olympia Bivalve

Revenue and Spending Variances

For the Month Ended July 31

Revenue

Expenses:

Packing supplies

Oyster bed maintenance

Wages and salaries

Shipping

Utilities

Other

Total expense

Net operating income

Olympia Bivalve farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,500 pounds of oysters in July. The company’s flexible budget for July appears below:

Explanation / Answer

Particulars Cost Formula Flexible budget for 7500 pounds Actual result for 7500 pounds Revenue and spending variance Actual - flexible) Favourable/Unfaourable $ $ Revenue $4.15 Q 31125 26600 -4525 U Expenses: Packing supplies $0.35 Q 2625 2795 170 U Oyster bed maintenance $3400 3400 3260 -140 F Wages and Salaries $0.30 Q 4350 4760 410 U Shipping 0.75 Q 5625 5355 -270 F Utilities $ 1260 1260 1070 -190 F Other $ 400 + $0.01Q 475 1095 620 U Total (B) 17735 18335 Net Operating Income (A - B) 13390 8265

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