Adger Corporation is a service company that measures its output based on the num

Question

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.

10. What amount of revenue would be included in Adger’s planning budget for May?

11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?

12. What amount of travel expenses would be included in Adger’s planning budget for May?

13. What amount of other expenses would be included in Adger’s planning budget for May?

14. What activity variance would Adger report in May with respect to its revenue? (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.)

15. What activity variances would Adger report with respect to each of its expenses 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.)

Fixed Element
per Month Variable Element per Customer Served Actual Total
for May Revenue $ 5,800 $ 189,500 Employee salaries and wages $ 54,000 $ 1,500 $ 105,900 Travel expenses $ 800 $ 25,600 Other expenses $ 33,000 $ 31,700

Explanation / Answer

10) Revenue in planning budget = 5800*30 = 174000

11) Employee salaries and wages in planning budget = (1500*30+54000) = 99000

12) Travel expense in planning budget = 800*30 = 24000

13) Other expense in planning budget = 33000

14) Activity variance in revenue = (35-30)*5800 = 29000 F

15) Activity variance of employee salary and wages = (35-30)*1500 = 7500 U

Activity variance of travel expense = (35-30)*800 = 4000 U

Other expense = 33000-33000 = 0 None

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