Question

Petrus Framing's cost formula for its supplies cost is $1,860 per month plus $11 per frame. For the month of March, the company planned for activity of 626 frames, but the actual level of activity was 635 frames. The actual supplies cost for the month was $9,200. The activity variance for supplies cost in March would be closest to:

Answer 1

Answer:

$355 unfavorable

Explanation:

Budgeted supplies cost was [$1,860 + (635 frames x $ 11)] = ($1,860 + $6,985) = $8,845

Actual supplies cost was $9,200, so the variance was = budgeted cost - actual cost = $8,845 - $9,200 = $355 unfavorable

Since the actual supplies cost was higher than the budgeted supplies cost, then the variance must be unfavorable (because more money was spent than expected).