Palmerton Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for December.
Fixed Element per Month
Revenue: $3,500
Employee salaries and wages: $41,500
Servicing materials: $600
Other expenses: $30,000
Variable Element per Well Serviced
Revenue: $159,800
Employee salaries and wages: $1,000
Servicing materials: $27,400
Other expenses: $29,500
Actual Total for December
Revenue: $159,800
Employee salaries and wages: $87,900
Servicing materials: $27,400
Other expenses: $29,500
When the company prepared its planning budget at the beginning of December, it assumed that 40 wells would have been serviced. However, 45 wells were actually serviced during December.
The variance for net operating income in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for December would have been closest to:
Group of answer choices
(a) $10,500 Favorable
(b) $1,000 Favorable
(c) $1,000 Unfavorable
(d) $10,500 Unfavorable