Hemphill Corporation uses customers served as its measure of activity. During Ju

Question

      Hemphill Corporation uses customers served as its measure of activity. During June, the company budgeted for 20,000 customers, but actually served 19,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

Fixed element per month

Variable element per customer

Revenue

-

$ 4.50

Wages and salaries

$ 23,900

$ 1.40

Supplies

$ 0

$ 0.80

Insurance

$ 5,700

$ 0.00

Miscellaneous

$ 5,000

$ 0.40

Actual results for June:

Revenue

$ 85,400

Wages and salaries

$ 52,700

Supplies

$ 17,500

Insurance

$ 5,500

Miscellaneous

$ 12,200

Required:
1. Prepare the company's flexible budget performance report for June. Label each variance as favorable (F) or unfavorable (U).

2. Comment on the results.

Fixed element per month

Variable element per customer

Revenue

-

$ 4.50

Wages and salaries

$ 23,900

$ 1.40

Supplies

$ 0

$ 0.80

Insurance

$ 5,700

$ 0.00

Miscellaneous

$ 5,000

$ 0.40

Explanation / Answer

1. Company's Flexible Budget Performance Report For June Actual results for June: Flexible Budget Variance Revenue $               85,400.00 $       85,500.00 $     100.00 (U) Wages and salaries $               52,700.00 $       50,500.00 $ 2,200.00 (U) Supplies $               17,500.00 $       15,200.00 $ 2,300.00 (U) Insurance $                 5,500.00 $          5,700.00 $     200.00 (F) Miscellaneous $               12,200.00 $       12,600.00 $     400.00 (F) Total Variance $                         4,000.00 (U) 2. Comment on the results. The overall company performance is not better as compare to its Flexible Budget with Actual Budget which denotes there is total variance amount is $4000 which is unfavorable.

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