Smithj 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 February, the kennel budgeted for 3, 500 tenant-days, but its actual level of activity was 3, 490 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The revenue variance for February would be closest to:
A)$640 F
B)$918 F
C)$640 U
D)$918 U

Question

Smithj 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 February, the kennel budgeted for 3, 500 tenant-days, but its actual level of activity was 3, 490 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting:  Actual results for February:  The revenue variance for February would be closest to:
A)$640 F 
B)$918 F 
C)$640 U 
D)$918 U

Quizplus · Accepted Answer

The revenue variance formula is:
Revenue variance = Actual revenue - Budgeted revenue

According to the given data, the budgeted tenant-days were 3,500, and the actual tenant-days were 3,490. Thus, the kennel fell short of its target by 10 tenant-days (3,500 - 3,490).

The budgeted revenue per tenant-day was $31.30, and the actual revenue per tenant-day was $30.90. Therefore, the revenue variance per tenant-day was:

Actual revenue per tenant-day - Budgeted revenue per tenant-day = $30.90 - $31.30 = -$0.40 (a negative value indicates unfavorable variance)

So, the total revenue variance for February was:

Revenue variance = Revenue variance per tenant-day x Actual tenant-days
Revenue variance = -$0.40 x 3,490
Revenue variance = -$1,396

A negative value for revenue variance indicates unfavorable variance, which means actual revenue is less than the budgeted revenue. The answer options show either a positive value (indicating a favorable variance) or a negative value with a positive number (indicating an unfavorable variance with an absolute value). Thus, option C is the only valid choice, which indicates an unfavorable variance of $640.

Smithj Kennel Uses Tenant-Days as Its Measure of Activity;an Animal