Exam 11: Flexible Budgets and Performance Analysis

A spending variance is the difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost for the period.

During October, Keliihoomalu Clinic budgeted for 2,700 patient-visits, but its actual level of activity was 2,200 patient-visits. Revenue should be $27.30 per patient-visit. Personnel expenses should be $21,100 per month plus $6.80 per patient-visit. Medical supplies should be $500 per month plus $4.90 per patient-visit. Occupancy expenses should be $5,700 per month plus $0.90 per patient-visit. Administrative expenses should be $3,700 per month plus $0.40 per patient-visit. Required: Prepare the clinic's flexible budget for October based on the actual level of activity for the month.

The administrative expenses in the planning budget for May would be closest to:

The spending variance for medical supplies in October would be closest to:

Kara Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $310 per month plus $84 per job plus $17 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in July to be 15 jobs and 127 meals, but the actual activity was 14 jobs and 126 meals. The actual cost for catering supplies in July was $3,620. The activity variance for catering supplies in July would be closest to:

The activity variance for selling and administrative expenses in June would be closest to:

The revenue variance for September would be closest to:

The spending variance for power cost in the flexible budget performance report for the month should be:

The net operating income in the planning budget for December would be closest to:

The spending variance for cleaning equipment and supplies in June would be closest to:

Filkins Clinic bases its budgets on the activity measure patient-visits. During February, the clinic planned for 3,900 patient-visits, but the actual level of activity was 4,100 patient-visits. The clinic has provided the following data concerning the formulas it uses in its budgeting: Required: Prepare a report showing the clinic's activity variances for February. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470. The vehicle operating cost in the planning budget for December would be closest to:

The activity variance for net operating income in August would be closest to:

The activity variance for personnel expenses in December would be closest to:

The spending variance for equipment depreciation in the flexible budget performance report for the month should be:

If activity is higher than expected, total variable costs should be higher than expected. If activity is lower than expected, total variable costs should be lower than expected.

The activity variance for administrative expenses in May would be closest to:

Carlisle Clinic uses patient-visits as its measure of activity. During December, the clinic budgeted for 2,500 patient-visits, but its actual level of activity was 2,100 patient-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: Required: Prepare a report showing the clinic's revenue and spending variances for December. Label each variance as favorable (F) or unfavorable (U).

The revenue variance for May would be closest to:

Rubidoux Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: In September, the company budgeted for 483 guests and 240 jeeps. The company's income statement showing the actual results for the month appears below: Required: Prepare a report showing the company's revenue and spending variances for September. Label each variance as favorable (F) or unfavorable (U).