Reuer Midwifery's cost formula for its wages and salaries is $2,900 per month plus $475 per birth. For the month of March, the company planned for activity of 116 births, but the actual level of activity was 117 births. The actual wages and salaries for the month was $56,270. The activity variance for wages and salaries in March would be closest to:
A) $1,730 U
B) $475 F
C) $475 U
D) $1,730 F

Question

Quizplus · Accepted Answer

To calculate the activity variance, we need to compare the actual activity level (117 births) with the planned activity level (116 births).

Actual Cost = $56,270

Planned Cost = $2,900 + ($475 x 116) = $58,040

Flexible Budget for Actual Activity Level: $2,900 + ($475 x 117) = $58,125

Activity Variance = Flexible Budget - Planned Cost

= $58,125 - $58,040

= $85 U

Therefore, the activity variance for wages and salaries in March is $85 U.

The closest answer choice is C, $475 U. While $85 U is not exactly equal to $475 U, it is closer to $475 U than any other answer choice provided.

Reuer Midwifery's Cost Formula for Its Wages and Salaries Is