Asked by Alianna Jiminian on Jun 15, 2024
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Otomo 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 July, the company budgeted for 389 guests and 180 jeeps. The company's income statement showing the actual results for the month appears below:
Required:Prepare a report showing the company's activity variances for July. Label each variance as favorable (F) or unfavorable (U).
Cost Drivers
Factors that cause a change in the cost of an activity, such as machine-hours, labor-hours, or quantity of materials.
Activity Variances
Differences between planned and actual costs arising from changes in activity levels in various cost centers within a business.
- Determine variations in operational performance and categorize these as advantageous or disadvantageous.
- Examine a company's financial health by scrutinizing its activity discrepancies.
Verified Answer
JI
Learning Objectives
- Determine variations in operational performance and categorize these as advantageous or disadvantageous.
- Examine a company's financial health by scrutinizing its activity discrepancies.