Question

Perla 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 March, the kennel budgeted for 2,230 tenant-days, but its actual level of activity was 2,190 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		−		$	34.10
Wages and salaries	$	3,330		$	7.60
Food and supplies		1,050			8.80
Facility expenses		9,100			5.40
Administrative expenses		10,850			0.50
Total expenses	$	24,330		$	22.30

Actual results for March:

Revenue	$	74,149
Wages and salaries	$	19,799
Food and supplies	$	20,817
Facility expenses	$	20,041
Administrative expenses	$	11,980

The revenue variance for March would be closest to:

Answer 1

Ans.	Revenue variance =   Actual revenue - Flexible budgeted revenue
		$74,149 - $74,679
		-530
		or    530 unfavorable
	*Calculation of flexible budgeted revenue:
	Revenue   =   Actual level of activity * Revenue per activity
		2,190 * $34.10
		$74,679
	*Flexible budget is prepared on the basis of actual activity.
	*Decrease in revenue from Flexible budget to Actual   =   Unfavorable.
	*Increase in revenue from Flexible budget to Actual   =   Favorable.