Lartey Corporation's cost formula for its selling and administrative expense is $22, 200 per month plus $27 per unit.For the month of December, the company planned for activity of 5, 300 units, but the actual level of activity was 5, 270 units.The actual selling and administrative expense for the month was $168, 150. The activity variance for selling and administrative expense in December would be closest to:
A)$810 U
B)$2, 850 F
C)$2, 850 U
D)$810 F

Question

Quizplus · Accepted Answer

The activity variance is calculated as the difference between the planned expense and the flexible budget expense based on actual activity. The planned expense for 5,300 units is $22,200 + ($27 * 5,300) = $165,300. The flexible budget expense for 5,270 units is $22,200 + ($27 * 5,270) = $164,490. The activity variance is $165,300 - $164,490 = $810, which is favorable (F) because the flexible budget expense is lower than the planned expense.

Lartey Corporation's Cost Formula for Its Selling and Administrative Expense