Galante Kennel uses tenant-days as its measure of activity; an animal housed in

Question

Galante Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, Kennel budgeted for 4,300 tenant-days, but its actual level of activity was 4,280 tenant-days. Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Fixed element per month Variable element per tenant-day Revenue — $30.80 Wages and salaries $3,300 $6.80 Food and supplies 700 11.60 Facility expenses 8,300 3.80 Administrative expenses 8,100 0.20 Total expenses $20,400 $22.40 Actual results for May: Revenue $108,080 Wages and salaries $23,530 Food and supplies $36,793 Facility expenses $19,280 Administrative expenses $9,146 The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for May would be closest to: $3,611 F $3,779 F $3,779 U $3,611 U

Explanation / Answer

All the budgeted expense is multiplied by 4280 which is the actual quantity. And operating income is calculated by revenue - total costs.

budget actual                                                                          4,300              4,280 Budget fixed Budget Actual Revenue /day variable    131,824.00    108,080.00 wages and salaries      62,104.00      23,530.00 Food and supplies      50,348.00      36,793.00 Facility expenses      24,564.00      19,280.00 administrative expenses        8,956.00        9,146.00 Total expenses    116,272.00      88,749.00 Operating income      15,552.00      19,331.00    3,779.00 F

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