Question

Jake’s Roof Repair has provided the following data concerning its costs:

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	20,700		$	15.00
Parts and supplies				$	7.50
Equipment depreciation	$	2,710		$	0.40
Truck operating expenses	$	5,720		$	1.50
Rent	$	4,630
Administrative expenses	$	3,870		$	0.80

   

For example, wages and salaries should be $20,700 plus $15.00 per repair hour. The company expected to work 2,500 repair-hours in May, but actually worked 2,400 repair-hours. The company expects its sales to be $53.00 per repair-hour.

Compute the company’s activity variances 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.)

Answer 1

ACTIVITY VARIANCE
	Planning Budget	Flexible Budget	Variance
Revenue	2500*53= 132500	2400*53= 127200	5300 U
Expenses:
Wages and salaries	20700+(15*2500)= 58200	20700+(15*2400)= 56700	1500 F
Parts and supplies	2500*7.5= 18750	2400*7.5= 18000	750 F
Equipment depreciation	2710+(.40*2500)= 3710	2710+(.40*2400)= 3670	40 F
Truck operating expenses	5720+(1.50*2500)= 9470	5720+(1.5*2400)= 9320	150 F
Rent	4630	4630	0 no effect
Administrative expenses	3870+(.80*2500)= 5870	3870+(.80*2400)=5790	80 F
Total expense	100630	98110F	2520 F
Net operating income	31870	29090	2780 U