Razor 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 November, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 3,010 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for November:
-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 November would be closest to:
A) $3,520 F
B) $3,428 U
C) $3,520 U
D) $3,428 F

Question

Razor 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 November, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 3,010 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for November: 
-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 November would be closest to:
A) $3,520 F 
B) $3,428 U 
C) $3,520 U 
D) $3,428 F

Quizplus · Accepted Answer

To calculate the revenue and spending variance in this scenario, we need to use the following formula:

Actual Revenue - Flexible Budget Revenue - Actual Spending + Flexible Budget Spending

From the table provided, we can see that actual revenue for November was $30,550, while the flexible budget revenue was $30,000 (calculated as $10 per tenant-day for the budgeted 3,000 tenant-days). This gives us a revenue variance of $550 favorable (actual - flexible budget).

Similarly, actual spending for November was $26,350, while the flexible budget spending was $27,000 (calculated as $9 per tenant-day for the budgeted 3,000 tenant-days). This gives us a spending variance of $650 unfavorable (flexible budget - actual).

Therefore, overall revenue and spending variance for November would be:

$550 F - $650 U = $100 U

Since the question asks for the variance amount, we do not need to include a sign (+ or -). Hence, the closest answer choice is $3,520 U.

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