Galante Kennel uses tenant-days as its measure of activity; an animal housed in
ID: 2654670 • Letter: G
Question
Galante 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 May, Kennel budgeted for 3,900 tenant-days, but its actual level of activity was 3,880 tenant-days. Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:
Data used in budgeting:
$18,800
$21.40
Actual results for May:
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 May would be closest to:
$2,723 F
$2,903 U
$2,723 U
$2,903 F
Galante 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 May, Kennel budgeted for 3,900 tenant-days, but its actual level of activity was 3,880 tenant-days. Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:
Explanation / Answer
Budgeted Net income = Budgeted tenant days * (Revenue per day - Variable overhead) - Fixed overhead
= 3,900 * ($30.40 - $21.40) - $18,800
= $16,300
Actual Net income = Actual revenue - Total cost
= $107,680 - ($23,490 + $36,789 + $19,240 + $9,138)
= $19,023
Variance in net operating income = Actual net income - Budgeted net income
= $19,023 - $16,300
= $2,723 F
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