Question

Exercise 8-2 Prepare a Report Showing Revenue and Spending Variances [LO8-2]

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,400 pounds of oysters in August. The company’s flexible budget for August appears below:

  

Quilcene Oysteria Flexible Budget For the Month Ended August 31
Actual pounds (q)		7,400
Revenue ($4.15q)	$	30,710
Expenses:
Packing supplies ($0.30q)		2,220
Oyster bed maintenance ($3,400)		3,400
Wages and salaries ($2,100 + $0.50q)		5,800
Shipping ($0.75q)		5,550
Utilities ($1,210)		1,210
Other ($450 + $0.01q)		524
Total expense		18,704
Net operating income	$	12,006

   

The actual results for August appear below:

  

Quilcene Oysteria Income Statement For the Month Ended August 31
Actual pounds		7,400
Revenue	$	27,100
Expenses:
Packing supplies		2,390
Oyster bed maintenance		3,260
Wages and salaries		6,210
Shipping		5,280
Utilities		1,020
Other		1,144
Total expense		19,304
Net operating income	$	7,796

  

Required:

Compute the company’s revenue and spending variances for August. (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

	Revenue and spending variances
Revenue	3610	U
Expenses:
Packing supplies	170	U
Oyster bed maintenance	140	F
Wages and salaries	410	U
Shipping	270	F
Utilities	190	F
Other	620	U
Total expense	600	U
Net operating income	4210	U