Figliola Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During October, the company budgeted for 6,700 units, but its actual level of activity was 6,680 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for October:

Data used in budgeting:
Actual results for October:
-The activity variance for direct labor in October would be closest to:
A)$110 U
B)$880 U
C)$880 F
D)$110 F

Question

Figliola Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During October, the company budgeted for 6,700 units, but its actual level of activity was 6,680 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for October:

Data used in budgeting:

Actual results for October:

-The activity variance for direct labor in October would be closest to:

Data used in budgeting:
 Actual results for October: 
-The activity variance for direct labor in October would be closest to:
A)$110 U 
B)$880 U 
C)$880 F 
D)$110 F

Quizplus · Accepted Answer

Since the question is asking for the activity variance for direct labor in October, we need to use the formula:

Activity Variance = (Actual Hours - Standard Hours) x Standard Rate

We are not given the actual hours or the standard rate, but we are given the standard hours as 8,000 and the total direct labor cost as $44,000, which includes both the wages and the benefits.

To separate out the wages from the benefits, we need to use the benefit rate of 25%:

Benefits = Wages x Benefit Rate
$11,000 = Wages x 0.25
Wages = $11,000 / 0.25
Wages = $44,000

Therefore, the total wages for direct labor in October were $44,000.

To calculate the standard rate, we need to divide the total direct labor cost (wages + benefits) by the standard hours:

Standard Rate = Total Direct Labor Cost / Standard Hours
Standard Rate = $44,000 / 8,000
Standard Rate = $5.50 per hour

Now we can calculate the actual hours from the given information:

Actual Labor Cost = Actual Hours x Standard Rate
$44,110 = Actual Hours x $5.50 per hour
Actual Hours = $44,110 / $5.50 per hour
Actual Hours = 8,020 hours

Finally, we can calculate the activity variance:

Activity Variance = (Actual Hours - Standard Hours) x Standard Rate
Activity Variance = (8,020 hours - 8,000 hours) x $5.50 per hour
Activity Variance = $110 F

Therefore, the answer is D, $110 F.

Figliola Corporation Manufactures and Sells a Single Product