Orscheln Snow Removal's cost formula for its vehicle operating cost is $2,800 per month plus $381 per snow-day.For the month of February,the company planned for activity of 17 snow-days,but the actual level of activity was 14 snow-days.The actual vehicle operating cost for the month was $7,920.The activity variance for vehicle operating cost in February would be closest to:
A)$1,357 F
B)$1,357 U
C)$1,143 F
D)$1,143 U

Question

Quizplus · Accepted Answer

The activity variance is calculated as the difference between the flexible budget cost and the planning budget cost. The flexible budget cost for 14 snow-days is $2,800 + ($381 * 14) = $8,134. The planning budget cost for 17 snow-days is $2,800 + ($381 * 17) = $9,277. The activity variance is $9,277 - $8,134 = $1,143 F (Favorable).

Orscheln Snow Removal's Cost Formula for Its Vehicle Operating Cost