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 MonthVariable Element per Well ServicedActual Total for DecemberRevenue $3,500$159,800Employee salaries and wages$41,500 $1,000$87,900Servicing materials $600$27,400Other expenses$30,000 $29,500When 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:
A. $1,000 U
B. $10,500 U
C. $1,000 F
D. $10,500 F
Answer: C
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