(Solution) Vision and Audio is a small owner-managed business

Vision and Audio is a small owner-managed business that specializes in the installation of television and audio equipment for customers with high-end home theatre systems. The company has provided the following data concerning its most recent month of operations:
 

	Budgeted	Budgeted	Actuals for
	Fixed	Variable	October
	Component	Component
	per Month	per Installation
Revenue		550	52,250
Installer wages	17,200		16,900
Selling and administrative expenses	1,225	15	2,804
			(1,304	fixed)
Office expenses	5,400	3	5,416
			(5,112	fixed)
Marketing expenses	3,160		3,300
Insurance	300		300
Miscellaneous expenses	550	2	709

The company uses the number of installations as its measure of activity. For example, selling and administrative expenses should be $1,225 plus $15 per job, and the actual selling and administrative expenses for October were $2,804. The company expected to do 100 installations in October, but actually did 95.

Required:
Prepare a comprehensive performance report for October. Assume that the static budget for October was based on an activity level of 100 jobs. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance).

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Solution – Vision and Audio is a small owner-managed business

Vision and Audio
Comprehensive Performance Report
For the Month Ended October 31
	Actual	Flexible Budget Variance		Flexible Budget	Sales Volume Variance		Static Budget
Jobs	95			95			100
Revenue	$52,250		None	$52,250	###	U	$55,000
Variable Expenses:
Selling and administrative expenses	###	75	U	###	75	F	###
Office expenses	304	19	U	285	15	F	300
Miscellaneous expenses	171	19	F	190	10	F	200
Total variable expenses	###	-75	U	###	100	F	###
Contribution margin	###	(75)	U	###	(2,650)	U	###
Less fixed expenses:
Installer wages	###	###	F	###		None	###
Selling and administrative expenses	###	79	U	###		None	###
Office expenses	###	###	F	###		None	###
Marketing expenses	###	140	U	###		None	###
Insurance	300		None	300		None	300
Miscellaneous expenses	538	-12	F	550		None	550
Total fixed expenses	###	###	F	###		None	###
Operating income	###	$306	F	###	$(2,650)	U	###

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