Question

etrus Framing's cost formula for its supplies cost is $1,760 per month plus $10 per frame. For the month of March, the company planned for activity of 616 frames, but the actual level of activity was 624 frames. The actual supplies cost for the month was $8,420. The activity variance for supplies cost in March would be closest to:

Answer 1

Answer:

$80 U

Explanation:

Flexible budget [$1,760 + ($10 × 624)]

$1,760+$6,240= $8,000

Planning budget [$1,760 + ($10 × 616)]

$1,760+$6,160= $7,920

Flexible budget-Planning budget= Activity variance

$8,000-$7,920=$80

Activity variance $80 U

Therefore the flexible budget is greater than the planning budget, the variance is unfavorable (U)