Question

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas...

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

Fixed Element
per Month
Variable Element
per Liter
Actual Total
for June
Revenue $ 12.00 $ 71,540
Raw materials $ 4.65 $ 29,230
Wages $ 5,600 $ 1.40 $ 13,860
Utilities $ 1,630 $ 0.20 $ 3,270
Rent $ 2,600 $ 2,600
Insurance $ 1,350 $ 1,350
Miscellaneous $ 650 $ 0.35 $ 2,590

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $5,600 plus $1.40 per liter of gelato sold and the actual wages for June were $13,860. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (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.)

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

Fixed Element
per Month
Variable Element
per Liter
Actual Total
for June
Revenue $ 12.00 $ 71,540
Raw materials $ 4.65 $ 29,230
Wages $ 5,600 $ 1.40 $ 13,860
Utilities $ 1,630 $ 0.20 $ 3,270
Rent $ 2,600 $ 2,600
Insurance $ 1,350 $ 1,350
Miscellaneous $ 650 $ 0.35 $ 2,590

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $5,600 plus $1.40 per liter of gelato sold and the actual wages for June were $13,860. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (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.)

Homework Answers

Answer #1
Actual results Flexible budget Revenue and spending variances
Revenue 71540 74400 2860 U
Expenses:
Raw materials 29230 28830 400 U
Wages 13860 14280 420 F
Utilities 3270 2870 400 U
Rent 2600 2600 0 None
Insurance 1350 1350 0 None
Miscellaneous 2590 2820 230 F
Total expense 52900 52750 150 U
Net Operating income 18640 21650 3010 U
Workings:
Flexible budget
Revenue 74400 =6200*12
Expenses:
Raw materials 28830 =6200*4.65
Wages 14280 =5600+(6200*1.4)
Utilities 2870 =1630+(6200*0.2)
Rent 2600
Insurance 1350
Miscellaneous 2820 =650+(6200*0.35)
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