Rients 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 October. When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October.The revenue variance in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for October would have been closest to:
A) $23,000 U
B) $23,000 F
C) $2,500 F
D) $2,500 U

Question

Rients 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 October.  When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October.The revenue variance in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for October would have been closest to:
A) $23,000 U 
B) $23,000 F 
C) $2,500 F 
D) $2,500 U

Quizplus · Accepted Answer

To calculate the revenue variance, we need to first calculate the flexible budget amount based on the actual number of customers served.

Variable cost per customer = ($36,000 - $20,000) / 50 customers = $320
Flexible budget = (44 customers x $400) + ($320 x 44 customers) = $28,160

Actual revenue = 44 customers x $400 = $17,600

Revenue variance = Actual revenue - Flexible budget 
Revenue variance = $17,600 - $28,160 = -$10,560

Since the revenue variance is negative, it means that actual revenue was lower than the flexible budget amount. In other words, the company generated less revenue than it should have given the actual number of customers served.

The closest answer choice is C) $2,500 F, which is incorrect.

Rients Corporation Is a Service Company That Measures Its Output