The Terminator Inc. provides on-site residential pest extermination services. The company has severalmobile teams who are dispatched from a central location in company-owned trucks. The company usesthe number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, butthe actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to theactual revenues and costs appears below:The Terminator Inc.Variance ReportFor the Month Ended April 30Planning ActualBudget Results VariancesJobs ............................................ 100 105Revenue ...................................... $19,500 $20,520 $1,020 FExpenses:Mobile team operating costs ..... 10,000 10,320 320 UExterminating supplies ............ 1,800 960 840 FAdvertising ............................... 800 800 0Dispatching costs .................... 2,200 2,340 140 UOffice rent ................................ 1,800 1,800 0Insurance ................................. 2,100 2,100 0Total expense ............................. 18,700 18,320 380 FNet operating income .................. $ 800 $ 2,200 $ 1,400 FRequired:Is the above variance report useful for evaluating how well revenues and costs were controlled duringApril? Why, or why not?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The Terminator Inc. provides on-site residential pest extermination services. The company has several
mobile teams who are dispatched from a central location in company-owned trucks. The company uses
the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but
the actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to the
actual revenues and costs appears below:
The Terminator Inc.
Variance Report
For the Month Ended April 30
Planning Actual
Jobs ............................................ 100 105
Revenue ...................................... $19,500 $20,520 $1,020 F
Expenses:
Mobile team operating costs ..... 10,000 10,320 320 U
Exterminating supplies ............ 1,800 960 840 F
Advertising ............................... 800 800 0
Dispatching costs .................... 2,200 2,340 140 U
Office rent ................................ 1,800 1,800 0
Insurance ................................. 2,100 2,100 0
Total expense ............................. 18,700 18,320 380 F
Net operating income .................. $ 800 $ 2,200 $ 1,400 F
Required:
Is the above variance report useful for evaluating how well revenues and costs were controlled during
April? Why, or why not?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
