Question

Jake’s Roof Repair has provided the following data concerning its costs: Fixed Cost per Month Cost per Repair-Hour Wages and salaries $ 20,600 $ 15.00 Parts and supplies $ 7.50 Equipment depreciation $ 2,710 $ 0.35 Truck operating expenses $ 5,740 $ 1.90 Rent $ 4,610 Administrative expenses $ 3,850 $ 0.50 For example, wages and salaries should be $20,600 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 $53.00 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

Activity Variance For the month May
Particulars				Flexible budget	Planning budget	Activity variance
Repair Hours (a)				2400	2500
Revenue @53 (2400*53), (2500*53) (B)				127200	132500	5300	U
Expenses: Wages & salaries(a)*15+20600				56600	58100	1500	F
Part & Supplies (1)@7.50				18000	18750	750	F
Equipment dep 2710+(0.35)*(a)				3550	3585	35	F
Truck operating exp 5740+(1.90)*(a)				10300	10490	190	F
Rent				4610	4610	0
Administrator exp 3850+(0.50)*(a)				5050	5100	50	F
Total expenses ( C)				98110	100635	2525	F
Net Operating income (B)-( C)				29090	31865	2775	U