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Chapter 09s (1)

2,100 u net operating income 5,000 $ 6,650 $ 1,650 $

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Unformatted text preview: 2,100 U Net operating income 5,000 $ 6,650 $ 1,650 $ F Larry's Lawn Service For the Month Ended June 30 Larry’s Flexible Budget Compared with the Planning Budget Activity and revenue increase by 10 percent, but net operating income increases by more than 10 percent due to the presence of fixed costs. 9-14 Revenue and Spending Variances Flexible budget revenue Actual revenue The difference is a revenue variance. Flexible budget cost Actual cost The difference is a spending variance. 9-15 Revenue and Spending Variances Revenue and Revenue/Cost Flexible Actual Spending Formulas Budget Results Variances Number of lawns (Q) 550 550 Revenue ($75Q) 41,250 $ 43,000 $ 1,750 $ F Expenses: Wages and salaries ($5,000 + $30Q) 21,500 $ 23,500 $ 2,000 $ U Gasoline and supplies ($9Q) 4,950 5,100 150 U Equipment maintenance ($3Q) 1,650 1,300 350 F Office and shop utilities ($1,000) 1,000 950 50 F Office and shop rent ($2,000) 2,000 2,000- Equipment Depreciation ($2,500) 2,500 2,500- Insurance ($1,000) 1,000 1,200 200 U Total expenses 34,600 36,550 1,950 U Net operating income 6,650 $ 6,450 $ 200 $ U Larry's Lawn Service For the Month Ended June 30 Larry’s Flexible Budget Compared with the Actual Results $1,750 favorable revenue variance 9-16 Revenue and Revenue/Cost Flexible Actual Spending Formulas Budget Results Variances Number of lawns (Q) 550 550 Revenue ($75Q) 41,250 $ 43,000 $ 1,750 $ F Expenses: Wages and salaries ($5,000 + $30Q) 21,500 $ 23,500 $ 2,000 $ U Gasoline and supplies ($9Q) 4,950 5,100 150 U Equipment maintenance ($3Q) 1,650 1,300 350 F Office and shop utilities ($1,000) 1,000 950 50 F Office and shop rent ($2,000) 2,000 2,000- Equipment Depreciation ($2,500) 2,500 2,500- Insurance ($1,000) 1,000 1,200 200 U Total expenses 34,600 36,550 1,950 U Net operating income 6,650 $ 6,450 $ 200 $ U Larry's Lawn Service For the Month Ended June 30 Larry’s Flexible Budget Compared with the Actual Results Revenue and Spending Variances Spending variances 9-17 Now, let’s use budgeting concepts to combine the revenue and spending variances reports for Larry’s Lawn Service. A Performance Report Combining Activity and Revenue and Spending Variances 9-18 Revenue and Revenue/Cost Planning Activity Flexible Spending Actual Formulas Budget Variances Budget Variances Results Number of lawns (Q) 500 550 550 Revenue ($75Q) 37,500 $ 3,750 $ F 41,250 $ 1,750 $ F 43,000 $ Expenses: Wages and salaries ($5,000 + $30Q) 20,000 $ 1,500 $ U 21,500 $ 2,000 $ U 23,500 $ Gasoline and supplies ($9Q) 4,500 450 U 4,950 150 U 5,100 Equipment maintenance ($3Q) 1,500 150 U 1,650 350 F 1,300 Office and shop utilities ($1,000) 1,000- 1,000 50 F 950 Office and shop rent ($2,000) 2,000- 2,000- 2,000 Equipment Depreciation ($2,500) 2,500- 2,500- 2,500 Insurance ($1,000) 1,000- 1,000 200 U 1,200 Total expenses 32,500 2,100 U 34,600 1,950 U 36,550 Net operating income 5,000 $ 1,650 $ F 6,650...
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2,100 U Net operating income 5,000 $ 6,650 $ 1,650 $ F...

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