Question

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,200 pounds of oysters in August. The company’s flexible budget for August appears below:

Quilcene Oysteria
Flexible Budget
For the Month Ended August 31
Actual pounds (q)		7,200
Revenue ($4.25q)	$	30,600
Expenses:
Packing supplies ($0.35q)		2,520
Oyster bed maintenance ($3,400)		3,400
Wages and salaries ($2,200 + $0.30q)		4,360
Shipping ($0.75q)		5,400
Utilities ($1,220)		1,220
Other ($480 + $0.01q)		552
Total expense		17,452
Net operating income	$	13,148

The actual results for August appear below:

Quilcene Oysteria
Income Statement
For the Month Ended August 31
Actual pounds		7,200
Revenue	$	26,900
Expenses:
Packing supplies		2,690
Oyster bed maintenance		3,260
Wages and salaries		4,770
Shipping		5,130
Utilities		1,030
Other		1,172
Total expense		18,052
Net operating income	$	8,848

Required:

Calculate the company’s revenue and spending variances for August. (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.)

Answer 1

Quilcene Oysteria
For the Month Ended August 31
		Flexible Budget	Actual Results	Variance	Effect
Pounds (q)		7,200	7,200	0	None
Revenue	$	30,600	26,900	-3,700	U
Expenses:
Packing supplies		2,520	2,690	170	U
Oyster bed maintenance		3,400	3,260	-140	F
Wages and salaries		4,360	4,770	410	U
Shipping		5,400	5,130	-270	F
Utilities		1,220	1,030	-190	F
Other		552	1,172	620	U
Total expense		17,452	18,052	600	U
Net operating income	$	13,148	8,848	-4,300	U