Question

revorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 7,000 units, but its actual level of activity was 6,960 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June: Data used in budgeting: Fixed element per month Variable element per unit Revenue - $ 28.40 Direct labor $ 0 $ 2.80 Direct materials 0 10.70 Manufacturing overhead 38,000 1.50 Selling and administrative expenses 23,600 0.30 Total expenses $ 61,600 $ 15.30 Actual results for June: Revenue $ 205,320 Direct labor $ 18,974 Direct materials $ 72,252 Manufacturing overhead $ 48,320 Selling and administrative expenses $ 25,768 The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for June would be closest to:

Answer 1

$9,906 F

Step-by-step explanation:

Calculation as follows:

Budget Income Statement

Particular $

Revenue (28.4 x 7,000) 198,800

Direct Labor (2.8 x 7,000) (19,600)

Direct Material (10.7 x 7,000) (74,900)

Manufacturing Overheads

(38,000 + [1.5 x 7,000] ) (48,500)

Selling and administrative Expenses

(23,600 + [0.3 x 7,000] ) (25,700)

Net Operating Income 30,100

Actual Income Statement

Particular $

Revenue 205,320

Direct Labor (18,974)

Direct Material (72,252)

Manufacturing Overheads (48,320)

Selling and administrative Expenses (25,768)

Net Operating Income 40,006

Activity variance for net operating income = Net operating income actual - Net operating income budgeted

Activity variance for net operating income = 40,006 - 30,100

Activity variance for net operating income = $9,906 F