Tabeling Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,500 units, but its actual level of activity was 6,540 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August: Data used in budgeting: Actual results for August: The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the revenue and spending variances report) for August would be closest to:
A)$10,362 F
B)$10,362 U
C)$10,970 F
D)$10,970 U

Question

Tabeling Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,500 units, but its actual level of activity was 6,540 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August: Data used in budgeting:  Actual results for August:  The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the revenue and spending variances report) for August would be closest to:
A)$10,362 F 
B)$10,362 U 
C)$10,970 F 
D)$10,970 U

Quizplus · Accepted Answer

The revenue variance is calculated as follows:
Actual units sold * (Actual selling price per unit - Budgeted selling price per unit)
= 6,540 * ($34 - $32)
= $10,080 U

The spending variance is calculated as follows:
Actual units sold * (Actual variable cost per unit - Budgeted variable cost per unit)
= 6,540 * ($20 - $18)
= $13,080 U

The net operating income variance is calculated as follows:
Actual net operating income - Budgeted net operating income
= ($54,000 - $52,495) = $1,505 U

The overall revenue and spending variance is the sum of the revenue variance and spending variance:
= $10,080 U + $13,080 U = $23,160 U
Therefore, the closest answer choice is D, $10,970 U (the answer key may have rounded the variance to the nearest thousand).

Tabeling Corporation Manufactures and Sells a Single Product