The Terminator Inc. provides on - site residential pest extermination services.

Question

The Terminator Inc. provides on - site residential pest extermination services. The company has several mobile teams who are dispatched from a central location in company - owned trucks. The company uses the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but the actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to the actual revenues and costs appears below: Required: Is the above variance report useful for evaluating how well revenues and costs were controlled during April? Why, or why not?

Explanation / Answer

The company uses the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but the actual number of jobs turned out to be 105. When we are comparing the actual revenues and costs with the budgeted revenues and costst , the variance can be calculated. Here the number of jobs are increased , so that the revenues were increased. Fixed expenses like rent, insurance, are remains unchanged. Whereas variable expenses like operating expenses,despatching costs were increased. So that the variances occured in this situation. Overall the actual results are satisfactory when we are compared with the budget results. We can say that the expenses are in controled position. So that we tot favourable net operating income. The expenses are less than the revenues, hence we got income .

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