Paulis Kennel uses tenant-days as its measure of activity; an animal housed in t
ID: 2542352 • Letter: P
Question
Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 4,000 tenant-days, but its actual level of activity was 3,980 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting Fixed Variable element element per per month tenant-day Revenue $30.50 Wages and salaries Food and supplies Facility expenses Administrative expenses Total expenses $ 3,000 400 8,000 7,800 $19,200 6.50 11.30 3.50 0.50 $21.80 Actual results for February:Explanation / Answer
Net operating income in Flexible budget=3980*(30.5-21.8)-19200= $15426 Net operating income in Planning budget=4000*(30.5-21.8)-19200= $15600 Activity variance for net operating income=15600-15426=$174 U Option 2 is correct