Fuquay Corporation Uses Customers Served as Its Measure of Activity

question 88

Essay

Fuquay Corporation uses customers served as its measure of activity.The company bases its budgets on the following information: Revenue should be $4.80 per customer served.Wages and salaries should be $26,500 per month plus $1.70 per customer served.Supplies should be $0.90 per customer served.Insurance should be $7,100 per month.Miscellaneous expenses should be $4,700 per month plus $0.20 per customer served.
The company reported the following actual results for May: Required:
Prepare a report showing the company's revenue and spending variances for May.Label each variance as favorable (F) or unfavorable (U).

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Definitions:

Diseconomies of Scale

The situation where a company or business grows so large that the costs per unit increase, typically due to inefficiencies.

Economies of Scale

Economies of scale describe the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Average Cost

The total cost of production divided by the quantity of output, representing the cost per unit of output.

Interest Rate

The cost of borrowing money or the return on investment, expressed as a percentage of the principal.