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

False

Explanation:

In Economics, more frequent switching from bonds to money would not result in a higher opportunity cost of holding money and lower money management costs because on the average, individuals will have less money to hold. As a result of this, there would be a sharp decline or fall in their opportunity costs.

Also, as individuals make more business transactions, there would be a consequent increase or rise in their money management costs.

Hence, more frequent switching from bonds to money would result in a lower opportunity cost of holding money and higher money management costs.