Question

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

Fixed Cost per Month

Cost per Repair-Hour

Wages and salaries	$	20,900		$	15.00
Parts and supplies				$	7.40
Equipment depreciation	$	2,720		$	0.60
Truck operating expenses	$	5,760		$	1.80
Rent	$	4,690
Administrative expenses	$	3,870		$	0.60

   

For example, wages and salaries should be $20,900 plus $15.00 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,700 repair-hours. The company expects its sales to be $47.00 per repair-hour.

   

Required:

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

Answer:

Jacks's Roof Repair
Activity Variances
For the Month Ended June 30
	Planning Budget	Flexible Budget	Activity Variances
Repair-hours (q)	2,800	2,700
Revenue ($47.00*q)	$131,600	$126,900	$4,700	U
Expenses:
Wages and salaries ($20,900 + ($15.00*q))	$62,900	$61,400	$1,500	F
Parts and supplies ($7.4q)	$20,720	$19,980	$740	F
Equipment depreciation ($2,720 + ($0.60*q))	$4,400	$4,340	$60	F
Truck operating expenses ($5,760 + ($1.80*q))	$10,800	$10,620	$180	F
Rent ($4,690)	$4,690	$4,690	$0
Administrative expenses ($3,870 + ($0.60*q))	$5,550	$5,490	$60	F
Total expense	$109,060	$106,520	$2,540	F
Net operating income	$22,540	$20,380	$2,160	U

Working notes for the above answer is as under