Question

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Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	5,400		$	203,000
Employee salaries and wages	$	53,000	$	1,400		$	108,500
Travel expenses			$	750		$	27,700
Other expenses	$	32,000				$	30,800

When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.

6. What is Adger’s revenue variance for May? (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.)

7. What is Adger’s employee salaries and wages spending variance for May? (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.)

8. What is Adger’s travel expenses spending variance for May? (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.)

9. What is Adger’s other expenses spending variance for May? (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.)

10. What amount of revenue would be included in Adger’s planning budget for May?

Answer 1

Answer-6)- Adger’s revenue variance for May is = $13000 U.

7)- Adger’s employee salaries and wages spending variance for May is = $500 F

8)- Adger’s travel expenses spending variance for May is = $2300 F

9)- Adger’s other expenses spending variance for May is = $1200 F

Explanation-

ADGER CORPORATION
Revenue & Spending Variances
For the month ended May
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	40 customer served*$5400 per customer	216000	203000	-13000	Unfavorable
Less:-Expenses
Employee salaries and wages	(40 customer served*$1400 per customer)+$53000	109000	108500	500	Favorable
Travel expenses	40 customer served*$750 per customer	30000	27700	2300	Favorable
Other expenses		32000	30800	1200	Favorable
Income from opreations		45000	36000	-9000	Unfavorable

10)- The amount of revenue would be included in Adger’s planning budget for May = $5400 per customer served*35 customers served

= $189000