The Terminator Inc. Variance Report For the Month Ended April 30 Adjusted Planning Budget Actual Results Variances Jobs 105 105 Revenue $20.520 $20,475 $ 45 F Expenses: Mobile team operating costs Exterminating supplies Advertising Dispatching costs Office rent Insurance. 10,320 960 800 10,500 1,890 840 2,310 1,890 2,205 180 F 930 F ... .... 40 F 30 U 2,340 1,800 2,100 90 F 105 F ..... Total expense 18.320 19,635 1,315 F Net operating income $ 2,200 $ 840 $1,360 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. A management intern has suggested that the budgeted revenues and costs should be adjusted for the actual level of activity in April before they are compared to the actual revenues and costs. Because the actual level of activity was 5% higher than budgeted, the intern suggested that all budgeted revenues and costs should be adjusted upward by 5%. A report comparing the budgeted revenues and costs, with this adjustment, 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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