To calculate the revenue and spending variances for Via Gelato, we'll follow these steps:

1. Determine the Flexible Budget:

   • The flexible budget is based on the actual activity level, which is 6,200 liters.

2. Calculate the Flexible Budget Amounts:

   • Revenue: Flexible budget revenue = 6,200 liters × $12.00 = $74,400
   • Raw materials: Flexible budget = 6,200 liters × $4.65 = $28,830
   • Wages: Flexible budget = $5,600 + (6,200 liters × $1.40) = $14,280
   • Utilities: Flexible budget = $1,630 + (6,200 liters × $0.20) = $2,870
   • Rent: Fixed at $2,600
   • Insurance: Fixed at $1,350
   • Miscellaneous: Flexible budget = $650 + (6,200 liters × $0.35) = $2,820

3. Compare the Actual Results to the Flexible Budget to Find Variances:

   • Revenue Variance: Actual revenue = $71,540

     • Flexible budget revenue = $74,400
     • Revenue variance = $74,400 - $71,540 = $2,860 (Unfavorable)

   • Raw Materials Variance: Actual raw materials = $29,230

     • Flexible budget raw materials = $28,830
     • Raw materials variance = $29,230 - $28,830 = $400 (Unfavorable)

   • Wages Variance: Actual wages = $13,860

     • Flexible budget wages = $14,280
     • Wages variance = $14,280 - $13,860 = $420 (Favorable)

   • Utilities Variance: Actual utilities = $3,270

     • Flexible budget utilities = $2,870
     • Utilities variance = $3,270 - $2,870 = $400 (Unfavorable)

   • Rent Variance: Actual rent = $2,600

     • Flexible budget rent = $2,600
     • Rent variance = $2,600 - $2,600 = $0 (None)

   • Insurance Variance: Actual insurance = $1,350

     • Flexible budget insurance = $1,350
     • Insurance variance = $1,350 - $1,350 = $0 (None)

   • Miscellaneous Variance: Actual miscellaneous = $2,590

     • Flexible budget miscellaneous = $2,820
     • Miscellaneous variance = $2,820 - $2,590 = $230 (Favorable)

4. Summary of Revenue and Spending Variances:

   Item	Actual	Flexible Budget	Variance	Effect
   Revenue	$71,540	$74,400	$2,860	Unfavorable
   Raw Materials	$29,230	$28,830	$400	Unfavorable
   Wages	$13,860	$14,280	$420	Favorable
   Utilities	$3,270	$2,870	$400	Unfavorable
   Rent	$2,600	$2,600	$0	None
   Insurance	$1,350	$1,350	$0	None
   Miscellaneous	$2,590	$2,820	$230	Favorable

Conclusion: Via Gelato experienced an unfavorable revenue variance of $2,860, indicating lower than expected revenue. On the cost side, the shop had unfavorable variances in raw materials and utilities but favorable variances in wages and miscellaneous expenses.

Would you like more details or have any other questions?

Related Questions:

1. How would fixed costs affect a flexible budget analysis?
2. What steps can be taken to improve an unfavorable revenue variance?
3. How can a business control variable costs more effectively?
4. Why is it important to differentiate between fixed and variable costs?
5. What are some common reasons for variances in utilities expenses?

Tip:

Regularly comparing actual performance to a flexible budget helps identify areas that need management attention and can improve future financial planning.