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

Question

Roye 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 September, the Kennel budgeted for 5,000 tenant-days, but its actual level of activity was 5,030 tenant-days. The Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

$17,700

$28.90     

Actual results for September:

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for September would be closest to:

Multiple Choice

A.) $8,329 F

B.) $8,329 U

C.) $8,527 U

D.) $8,527 F

Fixed element per month Variable element per tenant-day   Revenue — $35.50        Wages and salaries $2,200 $8.90        Expendables 1,400 15.40        Facility expenses 7,800 4.40        Administrative expenses   6,300 0.20        Total expenses

$17,700

$28.90     

Explanation / Answer

Flexible budget net operating income = (35.50-28.90*5030-17700 = 15498

Actual net operating income = 6971

Overall revenue and spending variance = 15498-6971 = 8527 U

so answer is c) $8,527 U

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