Question

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning...

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).)

Homework Answers

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
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