Pearse 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 December, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,980 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting:

Fixed Variable
per month per tenant-day
Revenue $32.10
Wages & Salaries $2,400 $ 7.00
Food & Supplies $ 900 $11.30
Facitlity Expenses $8,600 $ 3.50
Admin Expenses $6,700 $ 0.30
Total Expenses $18,600 $22.10
Actual results for December:

Revenue $97,978
Wages & Salaries $23,530
Food & Supplies $35,224
Facility Expenses $19,780
Admin. Expenses $ 7,404
1. The activity variance (show any unfavorable variance as a negative number) for net operating income in December would be:

2. The net operating income in the planning budget for December would be:

3. The net operating income in the flexible budget for December would be:

Pearse Kennel

1. Activity variance for net operating income in December would be:

= $200

2. The net operating income in the planning budget for December would be:

= $11,400

3. The net operating income in the flexible budget for December would be:

= $11,200

Explanation:

Data and Calculations:

                                   Fixed          Variable        Planning   Flexible  Variance

                             per month   per tenant-day   Budget    Budget

Revenue                                         $32.10         $96,300   $95,658    $642

Wages & Salaries    $2,400           $ 7.00           23,400      23,260       140

Food & Supplies       $ 900            $11.30           34,800       34,574      226

Facility Expenses   $8,600            $ 3.50            19,100        19,030        70

Admin Expenses    $6,700            $ 0.30            7,600          7,594          6

Total Expenses     $18,600           $22.10       $84,900     $84,458   $442

Net operating income                                       $11,400       $11,200  $200

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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answer; planning;