Exercise 9-8 Flexible Budgets and Activity Variances [LO9-1, LO9-2] Jake\'s Roof

Question

Exercise 9-8 Flexible Budgets and Activity Variances [LO9-1, LO9-2] Jake's Roof Repair has provided the following data concerning its costs Fixed Cost Cost per per Month Repair-Hour Wages and salaries Parts and supplies Equipment depreciation Truck operating expenses Rent Administrative expenses $15.00 $ 7.50 $ 0.40 $ 1.70 $21,000 $ 2,750 $ 5,780 $ 4,630 $ 3,810 $ 0.60 For example, wages and salaries should be $21,000 plus $15.00 per repair-hour. The company expected to work 2,900 repair-hours in May, but actually worked 2,800 repair-hours. The company expects its sales to be $47.00 per repair-hour. Required: Compute the company's activity variances for May. (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.) Jake's Roof Repair Activity Variances For the Month Ended May 31 Revenue Expenses Wages and salaries Parts and supplies Equipment depreciation Truck operating expenses Rent Administrative expenses Total expense Net operating income

Explanation / Answer

Jakes roof repair

activity variances

for the month ended may 31

10,540

23,070

flexible budget 2800 repair hours planning budget 2900 repair hours Activity variances Revenue (2800*47) (2900*47) 131,600 136,300 4,700 U expenses: wages and saleries (21,000 + 15*2800) (21,000+ 2900*15) 63,000 64,500 1,500 F jparts and supplies (7.50*2800) (7.50*2900) 21,000 21,750 750F equipment depreciation (2750+0.40*2800) (2750+0.40*2900) 3,870 3,910 40F rent (fixed for both) 4,630 4,630 none truck operating expenses (5780+1.70*2800)

10,540

10,710 170F administrative expenses (3810+0.60*2800) (3810+0.60*29000) 5,490 5,550 60F Total expense 108,530 111,050 $2,520F net operating income

23,070

25.250 2,180U

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