Ginnings Corporation Bases Its Budgets on the Activity Measure Customers

question 230

Essay

Ginnings Corporation bases its budgets on the activity measure customers served. During May, the company planned to serve 38,000 customers, but actually served 37,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:Revenue: $2.90qWages and salaries: $37,200 + $0.80qSupplies: $0.40qInsurance: $8,900Miscellaneous expense: $6,400 + $0.10qRequired:Prepare a report showing the company's activity variances for May. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

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Definitions:

Present Value

The value today of a future amount of money or series of payments, adjusted for a specific return rate.

Discounted

The process of determining the present value of a payment or stream of payments that will be received in the future.

Present Value

The current value of a future amount of money or stream of cash flows, given a specified rate of return.

Rate Of Return

The increase or decrease in value of an investment within a set timeframe, represented as a percentage of the investment's starting price.