Question

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			$	5,600		$	178,000
Employee salaries and wages	$	63,000	$	1,000		$	96,500
Travel expenses			$	550		$	15,900
Other expenses	$	42,000				$	39,800

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?

12. What amount of travel expenses would be included in Adger’s planning budget for May?

13. What amount of other expenses would be included in Adger’s planning budget for May?

14. What activity variance would Adger report in May with respect to its revenue?

15. What activity variances would Adger report with respect to each of its expenses for May?

Answer 1

11)	Salaries and wages
	63000+30*1000
	93000	answer
12)	Travel expense
	30*550
	16500	answer
13)	other expense
	$42,000	answer
14)	Activity variance
			flexible	planned	Activity variance
			budget	budget
	Revenue		196000	168000	28000	F
15)	Activity variance to expenses
			flexible	planned	Activity variance
			budget	budget
	Employees salaries		98000	93000	5000	U
	travel expense		19250	16500	2750	U
	other expense		42,000	42,000	0	N