Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,300 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)		7,300
Revenue ($4.20q)	$	30,660
Expenses:
Packing supplies ($0.35q)		2,555
Oyster bed maintenance ($3,400)		3,400
Wages and salaries ($2,200 + $0.30q)		4,390
Shipping ($0.75q)		5,475
Utilities ($1,280)		1,280
Other ($430 + $0.01q)		503
Total expense		17,603
Net operating income	$	13,057

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,300
Revenue	$	26,700
Expenses:
Packing supplies		2,725
Oyster bed maintenance		3,260
Wages and salaries		4,800
Shipping		5,205
Utilities		1,090
Other		1,123
Total expense		18,203
Net operating income	$	8,497

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

	Flexible Budget	Actuals	Revenue and Spending Variances
Pounds		7,300		7,300
Revenue ($4.20q)	$	30,660	$	26,700	$	3,960	U
Expenses:
Packing supplies ($0.35q)		2,555		2,725		170	U
Oyster bed maintenance ($3,400)		3,400		3,260		140	F
Wages and salaries ($2,200 + $0.30q)		4,390		4,800		410	U
Shipping ($0.75q)		5,475		5,205		270	F
Utilities ($1280)		1280		1090		190	F
Other ($430 + $0.01q)		503		1123		620	U
Total expense		17,603		18,203		600	U
Net operating income	$	13,057	$	8,497	$	4,560	U