Portsche Snow Removal's cost formula for its vehicle operating cost is $2,310 per month plus $317 per snow-day. For the month of November, the company planned for activity of 18 snow-days, but the actual level of activity was 20 snow-days. The actual vehicle operating cost for the month was $8,730. The activity variance for vehicle operating cost in November would be closest to:
A) $714 U
B) $714 F
C) $634 F
D) $634 U

Question

Quizplus · Accepted Answer

To calculate the activity variance, we need to find the difference between actual activity and planned activity and multiply it by the variable rate.

Planned variable cost = 18 snow-days x $317 = $5,706 
Actual variable cost = $8,730 - $2,310 (fixed cost) = $6,420 
Actual activity variance = (20 - 18) x $317 = $634 U

Therefore, the activity variance for vehicle operating cost in November would be $634 U, which is closest to option D.

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