Question

Use the following data for questions 17 and 19:

Roye 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 September, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,330 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for September:
Static budget for September: (Fixed element per month = FE, Variable element per tenant-day = VE)
Revenue: FE = - VE = $34.70
Wages and salaries: FE = $2,600 VE = $7.70
Expendables: FE = $1,400 VE = $14.50
Facility expenses: FE = $8,200 VE = $3.30
Administrative expenses: FE = $6,700 VE = $0.20
Total expenses: FE = $18,900 VE = $25.70
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Actual results for September:
Revenue: $112,721
Wages and salaries: $28,691
Expendables: $50,435
Facility expenses: $18,899
Administrative expenses: $7,096

The sales volume variance for September would be closest to:
A. $2,830 U
B. $1,185 U
C. $1,041 F
D. $750 U

Answer 1

The sales volume variance is calculated as $2,830 Unfavorable—the difference between the budgeted and the actual revenues for the number of tenant-days. The budgeted revenue for the actual level of activity is less than the actual revenue, indicating an unfavorable variance.

Step-by-step explanation:

To calculate the sales volume variance, which measures the change in budgeted revenue due to the difference between the actual and the budgeted level of activity, we first need to compute the budgeted revenue for the actual level of activity. Then, we will compare this budgeted revenue to the actual revenue.

The budgeted revenue per tenant-day is $34.70, so for 3,330 tenant-days, the budgeted revenue would be 3,330 × $34.70. After calculating this, we need to subtract it from the actual revenue to find the variance.
So the calculation is: (3,330 × $34.70) - $112,721.

Let's compute this:
Budgeted revenue for actual tenant-days = 3,330 × $34.70 = $115,551.
Actual revenue = $112,721.
Sales volume variance = $115,551 - $112,721 = $2,830.
The variance is unfavorable because the actual revenue is less than the budgeted revenue, hence $2,830 Unfavorable (U).