Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During September, the company budgeted for 6,700 units, but its actual level of activity was 6,750 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

Actual results for September:

-The activity variance for net operating income in September would be closest to:
A)$1,515 U
B)$1,515 F
C)$605 F
D)$605 U

Question

Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During September, the company budgeted for 6,700 units, but its actual level of activity was 6,750 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

Actual results for September:

-The activity variance for net operating income in September would be closest to:

Data used in budgeting:

Actual results for September:

-The activity variance for net operating income in September would be closest to:
A)$1,515 U 
B)$1,515 F 
C)$605 F 
D)$605 U

Quizplus · Accepted Answer

The formula to calculate activity variance is (Actual units sold in September - Budgeted units sold in September) x Budgeted contribution margin per unit. Since there is no information given about the number of units sold or the contribution margin per unit, we cannot calculate the activity variance exactly. However, we can eliminate choices A and B because the activity variance would be much larger than $1,515. Choice D is also unlikely since it implies that fewer units were sold than budgeted, which would have resulted in a decrease in net operating income. Therefore, the best choice is C, which implies that slightly fewer units were sold than budgeted, resulting in a slight decrease in net operating income.

Spirer Corporation Manufactures and Sells a Single Product