Arrasmith Corporation uses customers served as its measure of activity. During F

Question

Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for 35,100 customers, but actually served 33,400 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:

Revenue: $3.60q

Wages and salaries: $33,300 + $1.13q

Supplies: $0.53q

Insurance: $10,500

Miscellaneous expenses: $6,500 + $0.31q

The company reported the following actual results for February:

Required:

Prepare the company's flexible budget performance report for February. Label each variance as favorable (F) or unfavorable (U). (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.)

Revenue $ 121,800 Wages and salaries $ 68,100 Supplies $ 14,500 Insurance $ 10,500 Miscellaneous expense $ 18,200

Explanation / Answer

Prepare the company's flexible budget performance report for February

Actual Spending variance Flexible budget Activity variance Planning budget 33400 35100 Revenue 121800 1560 F 120240 6120 U 126360 Expenses Wages and salaries 68100 2942F 71042 1921 F 72963 Supplies 14500 3202 F 17702 901 F 18603 Insurance 10500 None 10500 None 10500 Miscellaneous exp 18200 1346 U 16854 527 F 17381 TOtal expenses 111300 4798 F 116098 3349 F 119447 Net operating income 10500 6358 F 4142 2771 U 6913

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