Asked by Joann Quigee on Jul 30, 2024
Verified
Lenci Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,100 units, but its actual level of activity was 5,050 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting: Actual results for May:
The revenue variance for May would be closest to:
A) $4,150 F
B) $2,170 F
C) $2,170 U
D) $4,150 U
Revenue Variance
The gap between what was expected in revenue and what was actually earned.
Budgeting Formulas
Mathematical expressions used to forecast and plan financial outcomes based on various inputs and assumptions.
Actual Level
The current, real-world status or extent of an activity or performance.
- Interpret and calculate revenue variances in a budget performance context.
Verified Answer
HL
Helio LeyvaAug 01, 2024
Final Answer :
C
Explanation :
Revenue variance = Actual revenue - Budgeted revenue
Actual revenue = Actual units sold * Selling price per unit = 5,050 units * $23 per unit = $116,150
Budgeted revenue = Budgeted units * Budgeted selling price per unit = 5,100 units * $23 per unit = $117,300
Revenue variance = $116,150 - $117,300 = -$1,150 (U)
Therefore, the revenue variance for May is $1,150 unfavorable or negative, which means actual revenue was lower than budgeted revenue. Choice C is the closest to this value, as it indicates a revenue variance of $2,170 unfavorable, which is the positive equivalent of a negative $2,170 variance.
Actual revenue = Actual units sold * Selling price per unit = 5,050 units * $23 per unit = $116,150
Budgeted revenue = Budgeted units * Budgeted selling price per unit = 5,100 units * $23 per unit = $117,300
Revenue variance = $116,150 - $117,300 = -$1,150 (U)
Therefore, the revenue variance for May is $1,150 unfavorable or negative, which means actual revenue was lower than budgeted revenue. Choice C is the closest to this value, as it indicates a revenue variance of $2,170 unfavorable, which is the positive equivalent of a negative $2,170 variance.
Learning Objectives
- Interpret and calculate revenue variances in a budget performance context.
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