Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6,700 units, but its actual level of activity was 6,670 units. The company has provided the following data concerning the formulas to be used in its budgeting: The activity variance for direct labor in March would be closest to:
A) $2,406 U
B) $216 U
C) $216 F
D) $2,406 F

Question

Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6,700 units, but its actual level of activity was 6,670 units. The company has provided the following data concerning the formulas to be used in its budgeting:  The activity variance for direct labor in March would be closest to:
A) $2,406 U 
B) $216 U 
C) $216 F 
D) $2,406 F

Quizplus · Accepted Answer

To calculate the activity variance for direct labor, we need to use the formula:

Activity Variance = (Actual Activity - Budgeted Activity) x Budgeted Rate

In this case, the actual activity is 6,670 units and the budgeted activity is 6,700 units, resulting in a difference of 30 units. The budgeted rate for direct labor is $8 per unit.

Therefore, the activity variance for direct labor is:

Activity Variance = (6,670 - 6,700) x $8 = -$240

Since the activity variance is negative, it means that the actual direct labor cost was higher than the budgeted direct labor cost. To convert the activity variance to a positive number, we need to change the sign, resulting in $240 F (favorable).

Therefore, the closest option is C) $216 F (favorable). Note that this is not the exact answer, but it is the closest option.

Rogstad Corporation Manufactures and Sells a Single Product