Refer to the data for The Terminator Inc. in Brief Exercise 8–6. A management intern has suggested thatthe budgeted revenues and costs should be adjusted for the actual level of activity in April before they arecompared to the actual revenues and costs. Because the actual level of activity was 5% higher than budgeted, the intern suggested that all budgeted revenues and costs should be adjusted upward by 5%. A reportcomparing the budgeted revenues and costs, with this adjustment, to the actual revenues and costs appearson the following page.The Terminator Inc.Variance ReportFor the Month Ended April 30AdjustedPlanning ActualBudget Results VariancesJobs ............................................. 105 105Revenue ...................................... $20,475 $20,520 $ 45 FExpenses:Mobile team operating costs .... 10,500 10,320 180 FExterminating supplies ............. 1,890 960 930 FAdvertising ............................... 840 800 40 FDispatching costs ..................... 2,310 2,340 30 UOffice rent ................................ 1,890 1,800 90 FInsurance ................................. 2,205 2,100 105 FTotal expense .............................. 19,635 18,320 1,315 FNet operating income .................. $ 840 $ 2,200 $ 1,360 FRequired:Is the above variance report useful for evaluating how well revenues and costs were controlled duringApril? Why, or why not?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Refer to the data for The Terminator Inc. in Brief Exercise 8–6. A management intern has suggested that
the budgeted revenues and costs should be adjusted for the actual level of activity in April before they are
compared to the actual revenues and costs. Because the actual level of activity was 5% higher than budgeted, the intern suggested that all budgeted revenues and costs should be adjusted upward by 5%. A report
comparing the budgeted revenues and costs, with this adjustment, to the actual revenues and costs appears
on the following page.
The Terminator Inc.
Variance Report
For the Month Ended April 30
Adjusted
Planning Actual
Budget Results Variances
Jobs ............................................. 105 105
Revenue ...................................... $20,475 $20,520 $ 45 F
Expenses:
Mobile team operating costs .... 10,500 10,320 180 F
Exterminating supplies ............. 1,890 960 930 F
Advertising ............................... 840 800 40 F
Dispatching costs ..................... 2,310 2,340 30 U
Office rent ................................ 1,890 1,800 90 F
Insurance ................................. 2,205 2,100 105 F
Total expense .............................. 19,635 18,320 1,315 F
Net operating income .................. $ 840 $ 2,200 $ 1,360 F
Required:
Is the above variance report useful for evaluating how well revenues and costs were controlled during
April? Why, or why not?
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