Question

Exercise 9-2 Prepare a Report Showing Revenue and Spending Variances [LO9-2]

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 ($4.25q)	$	31,450
Expenses:
Packing supplies ($0.30q)		2,220
Oyster bed maintenance ($3,300)		3,300
Wages and salaries ($2,300 + $0.30q)		4,520
Shipping ($0.55q)		4,070
Utilities ($1,270)		1,270
Other ($500 + $0.01q)		574
Total expense		15,954
Net operating income	$	15,496

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,400
Revenue	$	27,200
Expenses:
Packing supplies		2,390
Oyster bed maintenance		3,160
Wages and salaries		4,930
Shipping		3,800
Utilities		1,080
Other		1,194
Total expense		16,554
Net operating income	$	10,646

Required:

Calculate 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

Quilcene Oysteria
For the Month Ended August 31
	Flexible Budget	Actual result	Variance	Type
Actual pounds (q)	7,400	7,400
Revenue ($4.25q) $	31,450	27,200	4,250	U
Expenses:
Packing supplies ($0.30q)	2,220	2,390	170	U
Oyster bed maintenance ($3,300)	3,300	3,160	140	F
Wages and salaries ($2,300 + $0.30q)	4,520	4,930	410	U
Shipping ($0.55q)	4,070	3,800	270	F
Utilities ($1,270)	1,270	1,080	190	F
Other ($500 + $0.01q)	574	1,194	620	U
Total expense $	15,954	16,554	600	U
Net operating income $	15,496	10,646	4,850	U