The Terminator Inc. Variance Report For the Month Ended April 30 Actual Planning Budget Results Variances Jobs 105 100 Revenue. $20,520 $19.500 $ 1,020 F Expenses: Mobile team operating costs Exterminating supplies Advertising Dispatching costs Office rent 10,320 960 800 2,340 1,800 10,000 1,800 800 2,200 1,800 320 U 840 F 140 U Insurance 2,100 2,100 Total expense 18,320 18,700 380 F Net operating income $ 2,200 800 $ 1,400 F
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Critique a Variance Report
The Terminator Inc. provides on-site residential pest extermination services. The company bas several mobile teams who are dispatched from a central location in company-owned trucks. The company uses the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but the actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to the actual revenues and costs appears below:
Required:
Is the above variance report useful for evaluating how well revenues and costs were controlled during April? Why or Why not?
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