Domin Corporation Bases Its Budgets on the Activity Measure Customers

question 109

Essay

Domin Corporation bases its budgets on the activity measure customers served. During April, the company planned to serve 31,000 customers, but actually served 35,000 customers. Revenue is $4.80 per customer served. Wages and salaries are $33,000 per month plus $1.60 per customer served. Supplies are $1.00 per customer served. Insurance is $12,200 per month. Miscellaneous expenses are $7,400 per month plus $0.20 per customer served.
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:

Rate of Inflation

The Rate of Inflation is the pace at which the general level of prices for goods and services is rising, eroding purchasing power.

Real Interest Rates

The interest rate adjusted for inflation, representing the real cost of borrowing and the real yield to lenders or investors.

Usury Laws

Regulations that impose a maximum interest rate that may be charged on loans.

Low-Income Borrowers

Individuals or households with low income levels who may face difficulties in obtaining loans or are considered high risk by lenders.