Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

Actual results for May:

-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 May would be closest to:
A)$284 U
B)$670 F
C)$670 U
D)$284 F

Question

Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

Actual results for May:

-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 May would be closest to:
A)$284 U 
B)$670 F 
C)$670 U 
D)$284 F

Quizplus · Accepted Answer

The revenue variance is calculated by deducting the flexible budget revenue from the actual revenue. For May, this is ($187,500 - $175,000) = $12,500 F. The spending variance is calculated by deducting the flexible budget expenses from the actual expenses. For May, this is ($160,000 - $165,000) = $5,000 U. The overall revenue and spending variance is the sum of these two variances, which is ($12,500 - $5,000) = $7,500 U. Therefore, the closest answer is C, which is $670 U (since $7,500 is not one of the answer choices).

Lantagne Clinic Uses Client-Visits as Its Measure of Activity