Gelato Supremo is a popular neighborhood gelato shop. The company has provided t
ID: 2470316 • Letter: G
Question
Gelato Supremo is a popular neighborhood gelato shop. The company has provided the following data concerning its operations:
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 $5,000 plus $1.10 per liter of gelato sold, and the actual wages for July were $11,020. Gelato Supremo expected to sell 5,100 liters in July, but actually sold 5,000 liters.
Prepare a report showing Gelato Supremo revenue and spending variances for July. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Prepare a report showing Gelato Supremo revenue and spending variances for July. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
FixedElement
per Month Variable
Element
per Liter Actual
Total for
July Revenue $ 14.10 $ 73,770 Raw materials $ 4.50 $ 24,430 Wages $ 5,000 $ 1.10 $ 11,020 Utilities $ 1,820 $ 0.10 $ 2,192 Rent $ 3,180 $ 3,180 Insurance $ 1,860 $ 1,860 Miscellaneous $ 520 $ 0.10 $ 1,138
Explanation / Answer
1. Spending Variances :
a) Material Usage Variance = (SR*AU) - Actual Material Cost
= ( 4.50*5000) - $24,430
= $22,500 - $ 24,430 = $ 1,930 U
b) Variable Overhead spending Variance = (SR*AU)-ACtual OH
Caculation of Actual VOH rate : Wages 11,020
Utilities 2,192
Miscellaneous 1,138
Total Actual 14,350
Standard VOH (1.10+.0.10+0.10) per ltr 1.30
std. VOH = SR*AU = 1.30*5000 = $ 6,500
Actual VOH = $ 14,350
Variance = $ 7,850 U
b) Overheads spending variance :
Standard overheads :
Wages = 5000+1.10*5100 = 5000+5500 =$ 10,500
Utilities = 1820+0.10*5100= 1820+510 = $2,330
Rent = $ 3,120
Insurance = $ 1,860
Total Standard Overheads =$ 17,810
Standard quantity =$ 5,100
Standard rate = $ 3.49
Actual Overheads :
Wages =$ 11,020
Utilities =$ 2,192
Rent = $ 3,120
Insurance = $ 1,860
Total Actual Overheads $ 18,192
spending Variance = (SR*AU) - Actual Overheads = (3.49*5000) - 18,192
=$ 17,450-$ 18192 =$ 742 U
c) Revenue Variance = Actual Sales - (AU*SP)
= $ 73,770 - 5000*14.10
= $ 73,770 - $ 70,500 = $ 3,270 F
Flexible
Budget
Actual
Results
Revenue and Spending Variances for the month of July 31Flexible
Budget
Actual
Results
Revenue and spending Varainces Revenue $ $ $ Sales 70,500 73,770 3,270 F Expenses : Raw materials 22,500 24,430 1,930 U Wages 10,500 11,020 520 U Utilities 2,320 2,192 128 F Rent 3,180 3,180 0 None Insurance 1,860 1,860 0 None Miscellaneous 1,020 1,138 118 U Total Expenses 41,380 43,820 2,440 U Net Operating Income 29,120 29,950 830 FRelated Questions
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