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 36,800 customers, but actually served 27,200 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served: Revenue: $5.30q Wages and salaries: $35,000+ $1.64q Supplies: $1.04q Insurance: $12,200 Miscellaneous expenses: $8,200$0.48q The company reported the following actual results for February: Revenue Wages and salaries Supplies Insurance Miscellaneous expense $155, 800 69,800 $ 16,200 12,200 $ 26,700 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.)

Explanation / Answer

Variance is the amount of difference between actual and the budget

Budget Actual Variance Amount Nature Comment Customers                             27,200            27,200 Revenue                         1,44,160        1,55,800        11,640 F Revenue more than budgeted is good [27200* 5.3] Expenses: Wages and supplies                             79,608            69,800           9,808 F Cost less than budgeted is good [27200*1.64 +35000] Supplies                             28,288            16,200        12,088 F Cost less than budgeted is good [27200* 1.04] Insurance                             12,200            12,200                  -   F No variance Misc expenses                             21,256            26,700           5,444 U Cost more than budgeted is good [27200*0.48 +8200] Total expenses                         1,41,352        1,24,900        16,452 F Cost less than budgeted is good Net income                               2,808            30,900        28,092 F Profit more than budgeted is good

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