Refer to the data for The Terminator Inc. in Exercise 10—6. A management intern has suggested that the budgeted revenues and costs should be adjusted for the actual level of activity in April before they are compared to the actual revenues and costs. Because the actual level of activity was 5% higher than budgeted, the intern suggested that all budgeted revenues and costs should be adjusted upward by 5%. A report comparing the budgeted revenues and costs, with this adjustment, to the actual revenues and costs appears on the following page.

Required:

Is the above variance report useful for evaluating how well revenues and costs were controlled during April? Why, or why not?

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The Terminator Inc. Variance Report For the Month Ended April 30 Adjusted Planning Budget Actual Variances Results Jobs 105 105 S 20,520 $ 45 $ 20,475 Revenue Expenses: Mobile team operating costs 10,500 10,320 180 Exterminating supplies 1,890 960 930 Advertising 840 800 40 Dispatching costs 2,310 2,340 30 Office rent 1,800 1,890 90 Insurance 2,205 2,100 105 Total expense 1,315 19,635 18,320 S 840 $ 2,200 S 1,360 Net operating income