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			$	7.10
Equipment depreciation	$	2,710	$	0.50
Truck operating expenses	$	5,710	$	1.70
Rent	$	4,620
Administrative expenses	$	3,840	$	0.50

   

For example, wages and salaries should be $20,900 plus $15.00 per repair hour. The company expected to work 2,600 repair-hours in May, but actually worked 2,500 repair-hours. The company expects its sales to be $46.00 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
Flexible	planning	variance
Repair hours	2500	2600	100 U
Revenue	115000   [2500*46]	119600 [2600*46]	4600 U
expense
Wages and salaries	58400 [20900+(15*2500)]	59900      [20900+(15*2600)]	1500 F
parts and supplies	17750    [7.1*2500]	18460   [7.1*2600]	710 F
Equipment depreciation	3960     [(.50*2500)+2710]	4010 [(.50*2600)+2710]	50 F
Truck operating expenses	9960       [(1.7*2500)+5710]	10560   [(1.7*2600)+5710]	600 F
Rent	4620	4620	0 None
Administrative expenses	5090      [(.50*2500)+3840]	5140      [(.50*2600)+3840]	50 F
Total expense	95160	98070	2910 F
Net operating income	19840	21530	1690 U