Lizana Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,680 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December

Data used in budgeting:
Actual results for December:
-The overall revenue and spending variance (i.e. ,the variance for net operating income in the revenue and spending variance column on the flexible budget performance report)for December would be closest to:
A)$4,850 F
B)$5,180 U
C)$4,850 U
D)$5,180 F

Question

Lizana Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,680 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December

Data used in budgeting:
 Actual results for December: 
-The overall revenue and spending variance (i.e. ,the variance for net operating income in the revenue and spending variance column on the flexible budget performance report)for December would be closest to:
A)$4,850 F 
B)$5,180 U 
C)$4,850 U 
D)$5,180 F

Quizplus · Accepted Answer

The overall revenue and spending variance is calculated by subtracting the flexible budget amount from the actual amount. 
Overall revenue variance = Actual revenue - Flexible budget revenue 
= $258,000 - $263,850 
= $5,850 unfavorable 
Overall spending variance = Actual spending - Flexible budget spending 
= $245,000 - $240,150 
= $4,850 unfavorable 
Since the question is asking for the overall revenue and spending variance, we need to add the two variances together: 
Overall revenue and spending variance = Overall revenue variance + Overall spending variance 
= ($5,850 unfavorable) + ($4,850 unfavorable) 
= $10,700 unfavorable 
However, the question is asking for the closest answer, so the correct choice is C) $4,850 unfavorable.

Lizana Clinic Uses Client-Visits as Its Measure of Activity