Burget Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,100 client-visits, but its actual level of activity was 2,110 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for July:
-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 July would be closest to:
A) $4,508 F
B) $4,290 U
C) $4,290 F
D) $4,508 U

Question

Burget Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,100 client-visits, but its actual level of activity was 2,110 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for July: 
-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 July would be closest to:
A) $4,508 F 
B) $4,290 U 
C) $4,290 F 
D) $4,508 U

Quizplus · Accepted Answer

To calculate the overall revenue and spending variance, we need to subtract the actual operating income from the flexible budget operating income.

Flexible budget operating income = [(variable cost per visit x actual number of visits) + fixed costs] = [(233 x 2110) + 369,600] = $892,660

Actual operating income = revenues - expenses
= $861,870 - $889,950
= -$28,080 U (unfavorable)

Overall revenue and spending variance = flexible budget operating income - actual operating income
= $892,660 - (-$28,080)
= $920,740

Since the question asks for the closest answer, the best answer is C) $4,290 F (favorable) as it is the closest answer to the calculated variance of $920,740.

Burget Clinic Uses Client-Visits as Its Measure of Activity