Jake’s Roof Repair has provided the following data concerning its costs:
| Fixed Cost per Month | | Cost per Repair-Hour |
Wages and salaries | $ | 20,600 | | $ | 15.00 |
Parts and supplies | | | | $ | 7.00 |
Equipment depreciation | $ | 2,770 | | $ | 0.45 |
Truck operating expenses | $ | 5,790 | | $ | 1.90 |
Rent | $ | 4,610 | | | |
Administrative expenses | $ | 3,850 | | $ | 0.70 |
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For
example, wages and salaries should be $20,600 plus $15.00 per
repair-hour. The company expected to work 2,500 repair-hours in May, but
actually worked 2,400 repair-hours. The company expects its sales to be
$47.00 per repair-hour.
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Required: |
Compute the company’s activity variances for May.
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Explanation:
Jake’s Roof Repair Activity Variances For the Month Ended May 31 |
| Flexible Budget | Planning Budget | Activity Variances |
Repair-hours (q) | | 2,400 | | 2,500 | | | |
Revenue ($47.00q) | $ | 112,800 | $ | 117,500 | $ | 4,700 | U |
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Expenses: | | | | | | | |
Wages and salaries ($20,600 + $15.00q) | | 56,600 | | 58,100 | | 1,500 | F |
Parts and supplies ($7.00q) | | 16,800 | | 17,500 | | 700 | F |
Equipment depreciation ($2,770 + $0.45q) | | 3,850 | | 3,895 | | 45 | F |
Truck operating expenses ($5,790 + $1.90q) | | 10,350 | | 10,540 | | 190 | F |
Rent ($4,610) | | 4,610 | | 4,610 | | 0 | None |
Administrative expenses ($3,850 + $0.70q) | | 5,530 | | 5,600 | | 70 | F |
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Total expense | | 97,740 | | 100,245 | | 2,505 | F |
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Net operating income | $ | 15,060 | $ | 17,255 | $ | 2,195 | U |
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