Satoe Corporation Uses Customers Served as Its Measure of Activity

question 151

Essay

Satoe Corporation uses customers served as its measure of activity. During April, the company budgeted for 25,000 customers, but actually served 23,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:
Data used in budgeting: Actual results for April: Required:
Prepare the company's flexible budget performance report for April. Label each variance as favorable (F) or unfavorable (U).

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Definitions:

Implicit Costs

Implicit costs, also known as imputed or opportunity costs, are the costs of resources owned by the firm that are used in its own production process.

Explicit Costs

Direct, out-of-pocket payments for wages, rent, materials, and other inputs in the production process.

Opportunity Costs

The value of the best alternative foregone when a decision is made to pursue a particular action, essentially the cost of choosing one option over another.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own production, instead of earning income elsewhere.