Rossetto Corporation Bases Its Budgets on the Activity Measure Customers

question 109

Essay

Rossetto Corporation bases its budgets on the activity measure customers served. During January, the company planned to serve 30,000 customers, but actually served 33,000 customers. Revenue is $4.10 per customer served. Wages and salaries are $36,000 per month plus $1.50 per customer served. Supplies are $0.50 per customer served. Insurance is $12,000 per month. Miscellaneous expenses are $4,800 per month plus $0.10 per customer served.
Required:
Prepare a report showing the company's activity variances for January. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

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Definitions:

Inventory Period

The average time it takes for a company to turn its inventory into sales, reflecting the efficiency of inventory management.

COGS

Cost of Goods Sold, representing the direct costs attributable to the production of the goods sold by a company.

Operating Cycle

The duration of time from the acquisition of goods for inventory to the sale of the goods and the collection of payment.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods during a certain period, indicating efficiency in managing inventory.