Question

Dog 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 March, the kennel budgeted for 3,100 tenant-days, but its actual level of activity was 3,120 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:Data used in budgeting:Fixed element per month Variable element per tenant-dayRevenue - $ 34.00Wages and salaries $ 2,000 $ 7.00Food and supplies 1,000 13.50Facility expenses 7,500 2.50Administrative expenses 6,000 0.10Total expenses $ 16,500 $ 23.10Actual results for March:Revenue $ 104,372Wages and salaries $ 28,500Food and supplies $ 44,025Facility expenses $ 14,900Administrative expenses $ 7,090The revenue variance for March would be closest to:

Answer 1

Answer:

1,708 Unfavorable

Explanation:

Revenue Variance = Budgeted Revenue - Actual Revenue, and where actual revenue is less than standard revenue, then variance will be unfavorable.

Note: The variance is calculated for revenue and not the net profit, because both are different terms.

Budgeted = 3,100 tenant days

Actual = 3,120 tenant days

Revenue Budgeted for actual tenant days = $34 $\times$ 3,120 = $106,080

Less: Actual Revenue = $104,372

Since Standard revenue is more than actual revenue, the variance will be unfavorable = $106,080 - $104,372 = 1,708 Unfavorable