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 flexible budget performance 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 flexible budget performance 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 overall revenue and spending variance is the difference between the actual net operating income and the flexible budget net operating income.

Actual net operating income = Actual Revenue - Actual Expenses = $80,000 - $60,000 = $20,000

Flexible budget net operating income = Budgeted Revenue - Budgeted Expenses = $75,000 - $55,000 = $20,000

The overall revenue and spending variance = Actual net operating income - Flexible budget net operating income = $20,000 - $10,030 = $9,970 U

However, the answer choices are in thousands of dollars, so the answer is $10,970 U (D).

Tabeling Corporation Manufactures and Sells a Single Product