Lineback Corporation Bases Its Budgets on the Activity Measure Customers

question 208

Essay

Lineback Corporation bases its budgets on the activity measure customers served. During April, the company planned to serve 33,000 customers, but actually served 30,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:
Revenue: $2.60q
Wages and salaries: $26,000 + $0.70q
Supplies: $0.50q
Insurance: $5,400
Miscellaneous expense: $2,700 + $0.20q
Required:
Prepare a report showing the company's activity variances for April. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

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Definitions:

Operating Condition

Conditions or aspects related to the daily functionality and management of a business's core activities.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as property, plant, or equipment to improve its long-term operations.

Revenue Expenditure

Expenses incurred during the normal course of business operations that are expected to be consumed within the same accounting period.

Long-term

Long-term refers to holding or involving a period of time that is significantly longer than average, often used in the context of investments, debts, and assets.