Question

30-33

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	5,700		$	209,500
Employee salaries and wages	$	64,000	$	1,100		$	106,400
Travel expenses			$	560		$	19,000
Other expenses	$	43,000				$	40,700

When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.

9. What is Adger’s other expenses spending variance for May?

10. What amount of revenue would be included in Adger’s planning budget for May?

11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?

12. What amount of travel expenses would be included in Adger’s planning budget for May?

Answer 1

Requirement 9:

Other Expense Spending Variance = Budgeted Expense - Actual Results

= $43,000 - $40,700

= $2,300 Favourable

Requirement 10:

Revenue in Planning Budget = Variable component * Planned Number of customers

= $5,700 * 35 customers

= $199,500

Requirement 11:

Employee Salaries and Wages (Planning Budget) = Fixed Component + (Variable component * Planned Number of customers)

= $64,000 + (35 customers * $1,100)

= $64,000 + $28,500

= $102,500

Requirement 12:

Travel Expenses (Planning Budget) = Variable component * Planned Number of customers

= $560 * 35 customers

= $19,600