Wyckam Manufacturing Inc. has provided the following information concerning its
ID: 2511283 • Letter: W
Question
Wyckam Manufacturing Inc. has provided the following information concerning its manufacturing costs:
For example, utilities should be $1,400 per month plus $0.25 per machine-hour. The company expects to work 4,400 machine-hours in June. Note that the company’s direct labor is a fixed cost.
Required:
Prepare the company’s planning budget for June.
.
Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport. The company’s planning budget for July appears below:
In July, 24,000 actually meals were served. The company’s flexible budget for this level of activity appears below:
Required:
1. Calculate the company’s activity 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.)
Fixed Costper Month Cost per
Machine-Hour Direct materials $ 5.50 Direct labor $ 42,000 Supplies $ 0.10 Utilities $ 1,400 $ 0.25 Depreciation $ 15,400 Insurance $ 11,300
Explanation / Answer
Solution:
Activity Variance is the difference between planning budget and flexible budget.
Flight Café
Activity Budget Variance Report
For the Month Ended July 31
Planning Budget
Flexible Budget
Activity Variance
Budgeted meals
23,000
24,000
1,000
F
Revenue
101,200
105,600
4,400
F
Expenses:
Raw materials
52,900
55,200
2,300
U
Wages and salaries
10,700
10,900
200
U
Utilities
3,050
3,100
50
U
Facility rent
3,600
3,600
0
None
Insurance
2,500
2,500
0
None
Miscellaneous
3,100
3,200
100
U
Total expense
75,850
78,500
2,650
U
Net operating income
25,350
27,100
1,750
F
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Flight Café
Activity Budget Variance Report
For the Month Ended July 31
Planning Budget
Flexible Budget
Activity Variance
Budgeted meals
23,000
24,000
1,000
F
Revenue
101,200
105,600
4,400
F
Expenses:
Raw materials
52,900
55,200
2,300
U
Wages and salaries
10,700
10,900
200
U
Utilities
3,050
3,100
50
U
Facility rent
3,600
3,600
0
None
Insurance
2,500
2,500
0
None
Miscellaneous
3,100
3,200
100
U
Total expense
75,850
78,500
2,650
U
Net operating income
25,350
27,100
1,750
F
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