Question

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

	Fixed Cost per Month			Cost per Repair-Hour
Wages and salaries	$	21,300		$	15.00
Parts and supplies				$	7.50
Equipment depreciation	$	2,780		$	0.50
Truck operating expenses	$	5,770		$	1.70
Rent	$	4,670
Administrative expenses	$	3,810		$	0.50

For example, wages and salaries should be $21,300 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 $50.00 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

Jake’s Roof Repair
Activity Variances
For the Month Ended May 31
	Flexible Budget	Planning Budget	Activity Variances
Repair-hours	2400	2500
Revenue	120000	125000	5000	U
Expenses:
Wages and salaries	57300	58800	1500	F
Parts and supplies	18000	18750	750	F
Equipment depreciation	3980	4030	50	F
Truck operating expenses	9850	10020	170	F
Rent	4670	4670	0	None
Administrative expenses	5010	5060	50	F
Total expense	98810	101330	2520	F
Net operating income	21190	23670	2480	U