Feiner Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,220 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
-The activity variance for net operating income in December would be closest to:
A) $690 U
B) $9,670 U
C) $690 F
D) $9,670 F

Question

Feiner Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,220 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: 
-The activity variance for net operating income in December would be closest to:
A) $690 U 
B) $9,670 U 
C) $690 F 
D) $9,670 F

Quizplus · Accepted Answer

The activity variance for net operating income can be calculated as follows:
Actual client-visits - Budgeted client-visits = Activity variance
2,220 - 2,200 = 20 client-visits
Using the formula provided, the activity variance for net operating income can be calculated as follows:
Activity variance x Variable cost per unit = Activity variance in dollars
20 x $34.50 = $690
Since the actual level of activity was higher than budgeted, the activity variance is favorable or "U" for Unfavorable. Therefore, the answer is (C) $690 F.

Feiner Clinic Uses Client-Visits as Its Measure of Activity