Question

Pearse 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 3,000 tenant-days, but its actual level of activity was 2,980 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 Variable
per month per tenant-day
Revenue $32.10
Wages & Salaries $2,400 $ 7.00
Food & Supplies $ 900 $11.30
Facitlity Expenses $8,600 $ 3.50
Admin Expenses $6,700 $ 0.30
Total Expenses $18,600 $22.10
Actual results for December:

Revenue $97,978
Wages & Salaries $23,530
Food & Supplies $35,224
Facility Expenses $19,780
Admin. Expenses $ 7,404
1. The activity variance (show any unfavorable variance as a negative number) for net operating income in December would be:

2. The net operating income in the planning budget for December would be:

3. The net operating income in the flexible budget for December would be:

Answer 1

Pearse Kennel

1. Activity variance for net operating income in December would be:

= $200

2. The net operating income in the planning budget for December would be:

= $11,400

3. The net operating income in the flexible budget for December would be:

= $11,200

Step-by-step explanation:

Data and Calculations:

Fixed Variable Planning Flexible Variance

per month per tenant-day Budget Budget

Revenue $32.10 $96,300 $95,658 $642

Wages & Salaries $2,400 $ 7.00 23,400 23,260 140

Food & Supplies $ 900 $11.30 34,800 34,574 226

Facility Expenses $8,600 $ 3.50 19,100 19,030 70

Admin Expenses $6,700 $ 0.30 7,600 7,594 6

Total Expenses $18,600 $22.10 $84,900 $84,458 $442

Net operating income $11,400 $11,200 $200