Question

piechocki corporation manufactures and sells a single product. the company uses units as the measure of activity in its budgets and performance reports. during may, the company budgeted for 5,900 units, but its actual level of activity was 5,940 units. the company has provided the following data concerning the formulas used in its budgeting and its actual results for may: data used in budgeting: fixed element per month variable element per unit revenue $ 0 $ 32.60 direct labor $ 0 $ 3.90 direct materials 0 12.10 manufacturing overhead 33,400 1.80 selling and administrative expenses 28,300 0.40 total expenses $ 61,700 $ 18.20 actual results for may: revenue $ 200,564 direct labor $ 22,786 direct materials $ 73,824 manufacturing overhead $ 43,922 selling and administrative expenses $ 31,896 the activity variance for direct labor in may would be closest to:

Answer 1

The activity variance for direct labor in May would be closest to $166 Unfavorable.

What is the activity variance?

The activity variance refers to the difference caused by different activity levels with regard to the static or planning budget and the flexible budget.

The planning budget is static in nature as it retains the same planned activity level.

On the other hand, the flexible budget flexes the budget according to the levels of activity.

Budgeted activity level = 5,900 units

Actual activity level = 5,940 units

                                     Fixed element  Variable element

                                        per month             per unit

Revenue                              $ 0                    $ 32.60

Direct labor                         $ 0                      $ 3.90

Direct materials                  $ 0                       $12.10

Manufacturing overhead 33,400                      1.80

Selling & administrative  28,300                     0.40

Total expenses             $ 61,700                 $ 18.20

Actual results for May:

Revenue      $ 200,564

Direct labor    $ 22,786

Direct materials $ 73,824

Manufacturing overhead $ 43,922

Selling and administrative expenses $ 31,896

Direct labor cost using the planning budget = $23,010 ($3.90 x 5,900)

Direct labor cost based on the flexible budget = $23,166 ($3.90 x 5,940)

Activity Variance for direct labor = planning budget - flexible budget

= $166 ($23,010 - $23,166).

Thus, Piechocki Corporation's May activity variance is closest to $166 Unfavorable.

Learn more about activity variances at brainly.com/question/25169847

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