Question

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December:

Cicchetti Corporation Comparison of Actual Results to Planning Budget For the Month Ended December 31
	Actual Results		Planning Budget		Variances
Customers served		46,000		45,000
Revenue (3.60q)	$	165,300	$	162,000	$	3,300	F
Expenses:
Wages and salaries ($24,500 + $1.35q)		86,600		85,250		1,350	U
Supplies ($0.75q)		31,950		33,750		1,800	F
Insurance ($6,400)		6,400		6,400		0
Miscellaneous expense ($5,400 + $.44q)		23,400		25,200		1,800	F
Total expense		148,350		150,600		2,250	F
Net operating income	$	16,950	$	11,400	$	5,550	F

Required:

1.

Prepare a report showing the company’s revenue and spending variances for December. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

	Actual	Flexible	Variance
customers served	46000	46000
Revenue	165300	165600   [46000*3.6]	300 U
expenses
Wages and salaries ($24,500 + $1.35q)	86600	86600    [24500+(1.35*46000)]	0 NA
Supplies ($0.75q)	31950	34500    [.75*46000]	2550 F
Insurance ($6,400)	6400	6400	0NA
Miscellaneous expense ($5,400 + $.44q)	23400	25640    [5400+(.44*46000)]	2240
Total expense	148350	153140	4790 U
Net operating income	16950	12460	4490 F