Arrasmith Corporation Uses Customers Served as Its Measure of Activity

question 256

Essay

Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for 35,000 customers, but actually served 34,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:
Revenue: $3.50q
Wages and salaries: $33,200 + $1.10q
Supplies: $0.50q
Insurance: $10,400
Miscellaneous expense: $6,400 + $0.30q
The company reported the following actual results for February:
Required:
Prepare the company's flexible budget performance report for February. Label each variance as favorable (F) or unfavorable (U).

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Definitions:

Service Retailer

is a type of retailer that primarily sells services rather than tangible products, such as salons, repair shops, and fitness centers.

Oil Change

A routine maintenance service for vehicles involving the replacement of the engine's oil and oil filter to ensure proper engine function.

Off-price Retailers

Stores that sell brand name and designer merchandise at lower prices than traditional retail outlets by taking advantage of overstock, last season's products, or bulk buying.

Inventory

The complete list of items such as property, goods in stock, or the contents of a building.