Question

Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,200 units, but its actual level of activity was 6,160 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

	Fixed element per month			Variable element per unit
Revenue		-		$	27.80
Direct labor	$	0		$	3.10
Direct materials		0			10.20
Manufacturing overhead		37,200			1.10
Selling and administrative expenses		22,800			0.30
Total expenses	$	60,000		$	14.70

Actual results for June:

Revenue	$	178,318
Direct labor	$	18,606
Direct materials	$	60,652
Manufacturing overhead	$	43,896
Selling and administrative expenses	$	24,688

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for June would be closest to:

Answer 1

	Actual A	Flexible F	Revenue & spending variance A-F
Revenue	178,318	171248	7,070	F
		(6160*27.8)
Direct labor	18,606	19096	490	F
		(6160*3.1)
Direct materials	60,652	62832	2,180	F
		(6160*10.2)
Manufacturing overhead	43,896	43976	80	F
		37200+(6160*1.1)
Selling and administrative expenses	24,688	24648	40	U
		22800+(6160*.3)
Net operating income	30,476	20,696	9,780	F
$9780 F is the answer
If any doubt please comment. If satisfied you can rate
the answer