Question

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.)

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)