Perfect Patties, Inc. has several divisions. One division provides birthday parties at their facility. Each party sold provides entertainment, decorations, food, and party favors for 10 children. The bookkeeper has prepared a report comparing actual results for the month of June to budgeted results. Perfect Parties
Birthday Party Division Analysis of Revenues and Costs
For the Month Ended June 30
Planning Budge Actual Results Variances
Number of parties 80 92
Revenue $36,000 $39,560 $3,560 F
Expenses:
Food costs 7,200 8,648 1,448 U
Party supplies 3,200 3404 204 U
Party worker wages 6,400 7,728 1,328 U
Administrative salaries 3,700 3,500 200 F
Equipment depreciation 1,200 1,200 - None
Rent 5,000 5,000 - None
Total expense 26,700 29,480 2,780 U
Net operating income $9,300 10,080 $780 F
Food costs, party supplies, and party worker wages are variable costs.
Administrative salaries, equipment depreciation and rent are fixed costs.
Prepare a new report for June using the flexible budget approach.

Perfect Parties, Inc.

Birthday Party Division

Analysis of Revenues and Costs

For the month ended June 30

                                       Flexible Budget   Actual Results   Variances

Number of parties                      80                     92

Revenue                               $41,400             $39,560        $1,840 U

Expenses:

Food costs                               8,280                 8,648             368 U

Party supplies                          3,680                 3,404             276 F

Party worker wages                7,360                 7,728             368 U

Administrative salaries            3,700                3,500             200 F

Equipment depreciation          1,200                 1,200               -     None

Rent                                         5,000                5,000               -     None

Total expense                       29,220              29,480             260 U

Net operating income          $12,180             $10,080         $2,100 U

Explanation:

a) Data and Calculations:

Birthday Party Division Analysis of Revenues and Costs

For the Month Ended June 30

                                     Planning Budget   Actual Results   Variances

Number of parties                      80                     92

Revenue                               $36,000            $39,560        $3,560 F

Expenses:

Food costs                                7,200                 8,648           1,448 U

Party supplies                           3,200                  3404            204 U

Party worker wages                 6,400                 7,728          1,328 U

Administrative salaries             3,700                3,500            200 F

Equipment depreciation           1,200                 1,200            -      None

Rent                                          5,000                5,000            -       None

Total expense                        26,700              29,480          2,780 U

Net operating income           $9,300               10,080           $780 F

Flexing the variable revenue and costs:

Revenue                               $36,000/80 * 92 = $41,400

Food costs                                7,200/80 * 92 = $8,280

Party supplies                           3,200/80 * 92 = $3,680

Party worker wages                 6,400/80 * 92 = $7,360

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