Federick Clinic uses client-visits as its measure of activity.During October, the clinic budgeted for 3, 000 client-visits, but its actual level of activity was 3, 040 client-visits.The clinic 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 administrative expenses in October would be closest to:
A)$152 U
B)$152 F
C)$8 U
D)$8 F

Question

Federick Clinic uses client-visits as its measure of activity.During October, the clinic budgeted for 3, 000 client-visits, but its actual level of activity was 3, 040 client-visits.The clinic 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 administrative expenses in October would be closest to:
A)$152 U 
B)$152 F 
C)$8 U 
D)$8 F

Quizplus · Accepted Answer

To calculate the activity variance for administrative expenses, we need to use the following formula:

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

The budgeted rate for administrative expenses is $0.80 per client-visit.

Plugging in the numbers, we get:

Activity Variance = (3,040 - 3,000) x $0.80
Activity Variance = 40 x $0.80
Activity Variance = $32

Since the actual level of activity was higher than budgeted, the activity variance is unfavorable, which means it has increased the cost. Therefore, the answer is option C) $8 U (unfavorable) as it is the closest option to $32.

Federick Clinic Uses Client-Visits as Its Measure of Activity