Question

Skoff Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March.
- Fixed Element per Variable Element Actual Total
Month per Container Refurbished for March
Revenue $ 4,000 $ 130,000
Employee salaries $ 42,700 $ 1,000 $ 75,600
and wages
Refurbishing materials $ 600 $ 18,800
Other expenses $ 37,900 $ 38,400
When the company prepared its planning budget at the beginning of March, it assumed that 35 containers would have been refurbished. However, 32 containers were actually refurbished during March.
The activity variance for "Refurbishing materials" for March would have been closest to: Multiple Choice:
$1,800 F
$2,200 U
$1,800 U
$2,200 F

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Refurbishing materials:

Variable cost= $600

Fixed costs= $18,800

Estimated cost= 600*35 + 18,800= $39,800

Actual cost= 600*32 + 18,800= $38,000

Refurbishing activity variance= Estimated - actual cost

Refurbishing activity variance= 39,800 - 38,000= 1,800 favorable