Question

Jake’s Roof Repair has provided the following data concerning its costs:

	Fixed Cost per Month		Cost per Repair-Hour
Wages and salaries	$	21,500	$	16.00
Parts and supplies			$	7.20
Equipment depreciation	$	2,710	$	0.45
Truck operating expenses	$	5,730	$	1.60
Rent	$	4,660
Administrative expenses	$	3,860	$	0.50

   

For example, wages and salaries should be $21,500 plus $16.00 per repair hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,700 repair-hours. The company expects its sales to be $46.00 per repair-hour.

   

Required:

Compute the company’s activity variances 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.)

Answer 1

Computation of company activity variances for may

Particular	Planning Budget	Flexible Budget	Activity Variances
1. Repair hours	2800	2700
2. Sales	128800	124200	4600 U
3. Expenses:
a) Wages and salaries	66300	64700	1600 F
b) Parts and supplies	20160	19440	720 F
c) Equipment depreciation	3970	3925	45 F
d) Truck operating expenses	10210	10050	160 F
e) Rent	4660	4660	NONE
f) Administrative expenses	5260	5210	50 F
Total expenses	110560	107985	2575 F

Working Note

sales 2800*46=128800, 2700*46= 124200

Wages and salaries 21500+ (16*2800) , 21500+(16*2700)

Parts and supplies 7.20*2800, 7.20*2700

Equipment depreciation 0.45*2800+2710, 0.45*2700+2710

Truck operating expenses 5730+(1.6*2800), 5730+(1.6*2700)