Bade Midwifery's cost formula for its wages and salaries is $1,220 per month plus $246 per birth. For the month of October, the company planned for activity of 106 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $27,250. The activity variance for wages and salaries in October would be closest to:
A) $46 U
B) $984 F
C) $984 U
D) $46 F

Question

Quizplus · Accepted Answer

The activity variance is calculated by comparing the flexible budget (based on actual activity) to the planning budget (based on planned activity). The flexible budget for wages and salaries is $1,220 + ($246 * 102) = $26,212. The planning budget is $1,220 + ($246 * 106) = $26,236. The activity variance is $26,236 - $26,212 = $24 F. However, the correct calculation should be $984 F, as the difference between the planned and actual births is 4, and the cost per birth is $246, leading to a variance of 4 * $246 = $984 F.

Bade Midwifery's Cost Formula for Its Wages and Salaries Is