Answer:
Teagantigan Oil Well Servicing
The variance for net operating income in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for December would have been closest to:
$1,000 Favorable
Explanation:
a) Data and Calculations:
Fixed and Variable Budgets:
Fixed Element Variable Element Actual Total
per month per Well Serviced
Revenue $3,500 $159,800
Employee salaries & wages $41,500 $1,000 $ 87,900
Servicing materials $ 600 $ 27,400
Other expenses $30,000 $ 29,500
Flexible Budget Actual Variance
Revenue 45 wells $157,500 $159,800 $2,300 F
Employee salaries & wages 86,500 87,900 $1,400 U
Servicing materials 27,000 27,400 $400 U
Other expenses 30,000 29,500 $500 F
Net operating income $14,000 $15,000 $1,000 F
Total variance = $1,000 F
Flexible budget:
Revenue = $157,500 ($3,500 * 45)
Employee salaries & wages = $86,500 ($41,500 + ($1,000 * 45))
Servicing materials = $27,000 ($600 * 45)
