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bixtya [17]
2 years ago
7

Hammes Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and

performance reports. During February, the company budgeted for 5,500 units, but its actual level of activity was 5,510 units. The company has provided the following data concerning the formulas to be used in its budgeting: Fixed element per month, Variable element per unit:
Revenue −−−−, $ 43.10
Direct labor $ 0, $ 6.20
Direct materials 0, 15.70
Manufacturing overhead 47,800, 1.40
Selling and administrative expenses 27,300, 0.70
Total expenses $ 75,100, $ 24.00
The activity variance for net operating income in February would be closest to:
A. $191 U
B. $1,651 U
C. $191 F
D. $1,651 F
Business
1 answer:
Sergio039 [100]2 years ago
4 0

Answer:

c. $191 Favorable

Explanation:

                                  Flexible budget   Planning budget   Activity variance

Units produced              5,510 units            5,500 units

Revenue                         $237,481               $237,050

Total Expenses              ($207,340)            ($207,100)

Net Operating Income   $30,141                  $29,950                $191 F

<u>Workings</u>

Flexible budget revenue = 5,510 units*$43.10 = $237,481

Planning budget revenue =  5,500 units*$43.10 = $237,050

Flexible budget expenses =  $75,100 + $24*5510 = $207,340

Planning budget expenses = $75,100 + $24*5500 = $207,100

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