Galante Kennel uses tenant-days as its measure of activity; an animal housed in

Question

Galante Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, Kennel budgeted for 4,900 tenant-days, but its actual level of activity was 4,880 tenant-days. Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

$22,000

$24.20     

Actual results for May:

The activity variance for net operating income in May would be closest to:

$144 F

$6,513 U

$6,513 F

$144 U

Fixed element
per month Variable element per tenant-day   Revenue — $31.40        Wages and salaries $3,900 $7.40        Food and supplies 500 12.20        Facility expenses 8,900 4.40        Administrative expenses   8,700 0.20        Total expenses

$22,000

$24.20     

Explanation / Answer

Answer: $144 U

Cost Formula Planned budget for 4900 tenant days Flexible Budget for 4880 tenant days Activity Variance(Planned budget -Flexible Budget) $ $ $ Revenue $31.40 q 153860 153232 628 U Expenses: 0 Wages and salaries $3900+$7.40q 40160 40012 148 F Food and Supplies $500+$12.20q 60280 60036 244 F Facility expenses $8900+$4.40q 30460 30372 88 F Administrative expenses $8700+$0.20q 9680 9676 4 F Total cost 140580 140096 484 F Net Income (revenue - total cost) $13100 + $1.80q 13280 13136 144 U

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