Question
1. During June, Tarras Corporation plans to serve 52,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is
1. During June, Tarras Corporation plans to serve 52,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:
Revenue: $4.53q
Wages and salaries: $35,200 + $1.73q
Supplies: $0.93q
Insurance: $21,000
Miscellaneous expense: $6,200 + $0.63q
Required:
Prepare the company's planning budget for June.
2. Rhed 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 December, the kennel budgeted for 4,050 tenant-days, but its actual level of activity was 4,000 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element per month | Variable element per tenant-day | ||||
Revenue | - | $ | 34.60 | ||
Wages and salaries | $ | 2,900 | $ | 8.40 | |
Food and supplies | 1,750 | 13.60 | |||
Facility expenses | 8,900 | 5.10 | |||
Administrative expenses | 6,900 | 0.30 | |||
Total expenses | $ | 20,450 | $ | 27.40 | |
Actual results for December:
Revenue | $ | 137,765 |
Wages and salaries | $ | 36,780 |
Food and supplies | $ | 55,085 |
Facility expenses | $ | 29,435 |
Administrative expenses | $ | 7,865 |
The activity variance for administrative expenses in December would be closest to:
3. Rients Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for October.
Fixed Element per Month | Variable Element per Customer Served | Actual Total for October | |||||
Revenue | $ | 4,100 | $ | 182,900 | |||
Employee salaries and wages | $ | 42,300 | $ | 1,300 | $ | 98,800 | |
Travel expenses | $ | 700 | $ | 30,500 | |||
Other expenses | $ | 31,500 | $ | 31,900 | |||
When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October.
The spending variance for Other expenses for October would have been closest to:
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