Werber Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 2,700 client-visits, but its actual level of activity was 2,730 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
-The activity variance for net operating income in January would be closest to:
A) $2,019 U
B) $2,019 F
C) $489 F
D) $489 U

Question

Werber Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 2,700 client-visits, but its actual level of activity was 2,730 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: 
-The activity variance for net operating income in January would be closest to:
A) $2,019 U 
B) $2,019 F 
C) $489 F 
D) $489 U

Quizplus · Accepted Answer

The activity variance can be calculated using the following formula:

Activity Variance = Actual Quantity x (Actual Price - Budgeted Price)

In this case, the actual quantity is 2,730 client-visits and the budgeted quantity is 2,700 client-visits. The budgeted price per client-visit is not given, but we can calculate it using the budgeted net operating income and budgeted client-visits:

Budgeted Price = Budgeted Net Operating Income / Budgeted Client-Visits
Budgeted Price = $36,000 / 2,700
Budgeted Price = $13.33 per client-visit

The actual price per client-visit is also not given, but we can calculate it using the actual net operating income and actual client-visits:

Actual Price = Actual Net Operating Income / Actual Client-Visits
Actual Price = $38,070 / 2,730
Actual Price = $13.94 per client-visit

Plugging these values into the activity variance formula, we get:

Activity Variance = 2,730 x ($13.94 - $13.33)
Activity Variance = $489 F

Therefore, the closest answer is C, $489 F.

Werber Clinic Uses Client-Visits as Its Measure of Activity