Question

LPM Ltd. uses units produced as its measure of activity. During August, the company budgeted for 46,700 units of output, but actually produced 48,900 units of output. The company uses the following revenue and cost formulas in its budgeting, where q is the number of units of output:

Revenue: $10.40q
Salaries: $31,050 + $2.45q
Supplies: $1.25q
Utilities: $0.60q
Insurance: $23,090
Miscellaneous expenses: $13,800 + $0.21q

The company reported the following actual results for August:
Revenue $ 491,250
Salaries $ 148,360
Supplies $ 55,795
Utilities $ 31,920
Insurance $ 22,100
Miscellaneous expense $ 20,845

The revenue variance in August is:

Answer 1

The revenue variance in August is $5,570 favorable.

Step-by-step explanation:

LPM Ltd.

Actual Revenue = $491,250

Budgeted Revenue = $10.40 x 46,700 units = $485,680

Revenue Variance = Budgeted Variance - Actual Variance

Revenue Variance = $485,680 - $491,250

Revenue Variance = $5,570 favorable

Since the Actual Variance is greater than budgeted variance, hence favorable revenue variance.