During the holiday season, Ajay Singh offers gift-wrapping services at the local mall. Ajay budgets to wrap 1,250 packages per month for $3 per package. Ajay estimates that his variable costs (supplies) will equal $1 per package wrapped and that his fixed costs (rent and utilities) will equal $600 per month.

For the month of December, Ajay actually wrapped 1,500 packages, receiving $4,500 in revenue. However, Ajay spent $1,600 on supplies (he had to make an emergency purchase of bows at retail price). In addition, Ajay paid $700 to the mall’s management for rent and utilities.

Required:

a. What was Ajay’s master budget profit and actual profit for December?

b. By how much did Ajay’s profit increase or decrease in December due to changes in sales volume (i.e., what was the sales volume variance)?

c. What was Ajay’s variable cost variance and fixed cost spending variance for the month of December? Is there enough information to decompose Ajay’s variable cost variance into price and quantity components?

d. Prepare a budget reconciliation report for Ajay for the month of December.