Reference no: EM132462940

Problem - Use the following information to answer questions:

Jonathan's Tavern (JT) sells beer by the glass. JT's budgeted revenue and expenses are:

Revenue	$6.00 per glass of beer sold
Cost of beer	$2.00 per glass of beer sold
Wages	$4,000 per month
Utilities	$2,000 per month
Bar supplies	$.50 per glass of beer sold
Rent	$6,000 per month
Other expenses	$1,000 per month + $.50 per glass of beer sold

JT budgets December, 2013 sales of 30,000 glasses of beer.

Question 1 - What is JT's budgeted net operating income for December, 2013?

a. $90,000

b. $180,000

c. $78,000

d. $77,000

e. $135,000

JT's actual results for December, 2013 were sales of 24,000 glasses of beer. JT's overall financial results are shown below:

Revenues		$168,000
Expenses:
Cost of Beer Sold	$72,000
Wages	5,000
Utilities	1,500
Supplies	19,500
Rent	6,000
Other expense	8,000
Total expenses		$112,000
Net operating income		$56,000

Question 2 - JT prepares a flexible budget. What was the net operating profit shown in the flexible budget?

a. $77,000

b. $56,000

c. $72,000

d. $61,600

Question 3 - What was JT's flexible budget revenue variance?

a. $24,000 favorable

b. $12,000 unfavorable

c. $36,000 unfavorable

d. $0

e. $24,000 unfavorable

Question 4 - What was JT's flexible budget total expense variance? (Also known as flexible budget total spending variance)

a. $27,000 favorable

b. $9,000 unfavorable

c. $0

d. $27,000 unfavorable

e. $9,000 favorable