Arrasmith Corporation Uses Customers Served as Its Measure of Activity

question 197

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: $3.50qWages and salaries: $33,200 + $1.10qSupplies: $0.50qInsurance: $10,400Miscellaneous expense: $6,400 + $0.30qThe 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:

Vendors

Businesses or individuals that sell goods and services.

Double-Entry Bookkeeping System

An accounting system where every entry to an account requires a corresponding and opposite entry to a different account, ensuring the accounting equation remains balanced.

Single-Entry System

An accounting method where each financial transaction is recorded only once, either as an expense or income, making it simpler but less comprehensive than double-entry systems.

Cash Flow

The total amount of money being transferred into and out of a business, affecting its liquidity, solvency, and overall financial health.