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6 September, 21:27

LPM Ltd. uses units produced as its measure of activity. During August, the company budgeted for 46,700 units of output, but actually produced 48,900 units of output. The company uses the following revenue and cost formulas in its budgeting, where q is the number of units of output:

Revenue: $10.40q

Salaries: $31,050 + $2.45q

Supplies: $1.25q

Utilities: $0.60q

Insurance: $23,090

Miscellaneous expenses: $13,800 + $0.21q

The company reported the following actual results for August:

Revenue $ 491,250

Salaries $ 148,360

Supplies $ 55,795

Utilities $ 31,920

Insurance $ 22,100

Miscellaneous expense $ 20,845

The revenue variance in August is:

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Answers (1)
  1. 7 September, 01:07
    0
    The revenue variance in August is $5,570 favorable.

    Explanation:

    LPM Ltd.

    Actual Revenue = $491,250

    Budgeted Revenue = $10.40 x 46,700 units = $485,680

    Revenue Variance = Budgeted Variance - Actual Variance

    Revenue Variance = $485,680 - $491,250

    Revenue Variance = $5,570 favorable

    Since the Actual Variance is greater than budgeted variance, hence favorable revenue variance.
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