Chapter 9, Problem 1TF15

1

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute amount of revenue included in flexible budget

Answer to Problem 1TF15

The amount of revenue included in flexible budget is $175,000.

Explanation of Solution

  $\begin{array}{l}Amountofrevenueinflexiblebudget=\left(Variableelementpercustomerserved\times Actualactivity\right)\\ Amountofrevenueinflexiblebudget=\$5,000\times 35\\ Amountofrevenueinflexiblebudget=\$175,000\end{array}$

2

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute employee salaries and wages in flexible budget.

Answer to Problem 1TF15

The employee salaries and wages in flexible budget is $88,500.

Explanation of Solution

  $\begin{array}{l}Amountofflexiblebudget=\left(\begin{array}{l}\left(\begin{array}{l}Variableelementpercustomerserved\\ \times Actualactivity\end{array}\right)\\ +Fixedelemengtpermonth\end{array}\right)\\ Amountofflexiblebudget=((\$1,100\times 35)+\$50,000)\\ Amountofflexiblebudget=\$88,500\end{array}$

3

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute travel expenses in flexible budget.

Answer to Problem 1TF15

The travel expense in flexible budget is $21,000.

Explanation of Solution

  $\begin{array}{l}Amountoftravel\exp ensesinflexiblebudget=\left(Variableelementpercustomerserved\times Actualactivity\right)\\ Amountoftravel\exp ensesinflexiblebudget=\$600\times 35\\ Amountoftravel\exp ensesinflexiblebudget=\$21,000\end{array}$

4

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute other expenses in flexible budget.

Answer to Problem 1TF15

The other expenses in flexible budget are $36,000.

Explanation of Solution

The Flexible budget other expenses is $36,000 in May month.

5

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute net operating income in flexible budget.

Answer to Problem 1TF15

The net operating income in flexible budget is $29,500

Explanation of Solution

Particulars	Amount	Amount
Revenue		$175,000
Less: Salaries and wages	$88,500
Travel expenses	$21,000
Other expenses	$36,000	$145,500
Net Operating Income		$29,500

6

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute revenue variances.

Answer to Problem 1TF15

The revenue variances is $15,000 U

Explanation of Solution

  $\begin{array}{l}\mathrm{Re}venue\mathrm{var}ianceinMaymonth=\left(Amountofrevenueintheflexiblebudget-Actualresult\right)\\ \mathrm{Re}venue\mathrm{var}ianceinMaymonth=\$175,000-\$160,000\\ \mathrm{Re}venue\mathrm{var}ianceinMaymonth=\$15,000\end{array}$

7

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute employee salaries and wages spending variance.

Answer to Problem 1TF15

The employee salaries and wages spending variance is $500 F.

Explanation of Solution

  $\begin{array}{l}Salariesandwagesspending\mathrm{var}iance=\left(Amountofsalariesandwagesinflexiblebudget-Actualresult\right)\\ Salariesandwagesspending\mathrm{var}iance=\$88,500-\$88,000\\ Salariesandwagesspending\mathrm{var}iance=\$550\end{array}$

8

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute travel expenses in spending variance.

Answer to Problem 1TF15

The travel expenses in spending variance are $2,000 F.

Explanation of Solution

  $\begin{array}{l}Travel\exp ensesspending\mathrm{var}ianceinMaymonth=\left(Amountoftravel\exp enseinflexiblebudget-Actualresult\right)\\ Travel\exp ensesspending\mathrm{var}ianceinMaymonth=\$21,000=\$19,000\\ Travel\exp ensesspending\mathrm{var}ianceinMaymonth=\$2,000\end{array}$

9

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute other expense spending variance.

Answer to Problem 1TF15

The other expense spending variance is $1,500 F

Explanation of Solution

  $\begin{array}{l}Other\exp ensesspending\mathrm{var}iance=\left(Amountoftravel\exp enseinflexiblebudget-Actualresult\right)\\ Other\exp ensesspending\mathrm{var}iance=\$36,000-\$34,500\\ Other\exp ensesspending\mathrm{var}iance=\$1,500\end{array}$

10

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute amount if revenue in planning budget.

Answer to Problem 1TF15

The amount if revenue in planning budget is $150,000.

Explanation of Solution

  $\begin{array}{l}Amountofrevenueinplannedbudget=\left(Variableelementpercustomerserved\times Plannedactivity\right)\\ Amountofrevenueinplannedbudget=\$5,000\times 30\\ Amountofrevenueinplannedbudget=\$150,000\end{array}$

11

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute amount of employee salaries and wages in planning budget.

Answer to Problem 1TF15

The amount of employee salaries and wages in planning budget is $83,000.

Explanation of Solution

  $\begin{array}{l}Amountofplannedbudget=\left(\begin{array}{l}\left(\begin{array}{l}Variableelementpercustomerserved\\ \times Actualactivity\end{array}\right)\\ +Fixedelemengtpermonth\end{array}\right)\\ Amountofplannedbudget=((\$1,100\times 30)+\$50,000)\\ Amountofplannedbudget=\$83,000\end{array}$

12

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute amount of travel expenses in planning budget.

Answer to Problem 1TF15

The amount of travel expenses in planning budget is $18,000.

Explanation of Solution

  $\begin{array}{l}AmountofTravel\exp ensesinplannedbudget=\left(Variableelementpercustomerserved\times Plannedactivity\right)\\ AmountofTravel\exp ensesinplannedbudget=\$600\times 30\\ AmountofTravel\exp ensesinplannedbudget=\$18,000\end{array}$

13

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute amount of other expenses in planning budget.

Answer to Problem 1TF15

The amount of other expenses in planning budget is $36,000.

Explanation of Solution

The amount of other expenses in planning budget is $36,000 for the month of May.

14

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute activity variance report with respect to its revenue.

Answer to Problem 1TF15

The activity variance report with respect to its revenue is $25,000 F

Explanation of Solution

  $\begin{array}{l}Amountofrevenue\mathrm{var}ianceinMaymonth=\left(Flexiblebudgetrevenue-Plannedbudget\right)\\ Amountofrevenue\mathrm{var}ianceinMaymonth=\$175,000-\$150,000\\ Amountofrevenue\mathrm{var}ianceinMaymonth=\$25,000\end{array}$

15

To determine

Introduction: Variance means the difference in value which comes when actual figure and estimated or budgeted figure are compared. It is helpful in finding out the cause of difference that arises between figures and formulates the corrective measure, which helps to reduce all those difficulties.

Compute activity variance with respect to each of its expenses.

Answer to Problem 1TF15

The activity variance with respect to employee salaries and wages is $5,500 unfavorable, travel expense is $3,000 unfavorable, and other expenses are nil

Explanation of Solution

Particulars	Flexible budget	Planning budget	Activity Variances
Employee salaries and wages	$88,500	$83,000	$5,500(U)
Travel expenses	$21,000	$18,000	$3,000 (U)
Other expenses	$36,000	$36,000	$0