Asked by Sophia Colosimo on Jul 26, 2024
Verified
Thorman Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for August.
When the company prepared its planning budget at the beginning of August, it assumed that 35 customers would have been served. However, 39 customers were actually served during August.
Required:
Prepare a report showing the company's revenue and spending variances for August. Indicate in each case whether the variance is favorable (F) or unfavorable (U).
Planning Budget
A financial plan that estimates future revenues, expenses, and resources needed for a specific time period, helping manage resources effectively.
Revenue Variances
The differences between actual revenue generated and the expected (or budgeted) revenue over a specific period.
Spending Variances
Differences between the budgeted or standard cost of production and the actual cost incurred.
- Learn how to prepare a flexible budget based on actual activity levels.
- Gain the ability to calculate and interpret variances from budget, both favorable and unfavorable.
Verified Answer
Learning Objectives
- Learn how to prepare a flexible budget based on actual activity levels.
- Gain the ability to calculate and interpret variances from budget, both favorable and unfavorable.
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