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 4,600 tenant-days, but its actual level of activity was 4,580 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 — $31.10 Wages and salaries $3,600 $7.10 Food and supplies 200 11.90 Facility expenses 8,600 4.10 Administrative expenses 8,400 0.50 Total expenses $20,800 $23.60 Actual results for May: Revenue $108,380 Wages and salaries $23,560 Food and supplies $36,796 Facility expenses $19,310 Administrative expenses $9,152 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: $5,862 U $6,012 U $6,012 F $5,862 F

Explanation / Answer

Flexible Budget is prepared as under:

So, answer is $5,862 F

Fixed element per month Variable element per tenant-day Total   Revenue 31.1 143060   Wages and salaries 3,600 7.1 36,260   Food and supplies 200 11.9 54,940   Facility expenses 8,600 4.1 27,460   Administrative expenses   8,400 0.5 10,700   Total expenses 20,800 23.6 1,29,360 Net profit 13,700 Actual Revenue 108380   Wages and salaries 23,560   Food and supplies 36,796   Facility expenses 19,310   Administrative expenses 9,152 Net profit 19,562

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