Luc Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 5,000 units, but its actual level of activity was 4,950 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for February:
-The activity variance for direct labor in February would be closest to:
A) $340 U
B) $760 F
C) $340 F
D) $760 U

Question

Luc Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 5,000 units, but its actual level of activity was 4,950 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for February: 
-The activity variance for direct labor in February would be closest to:
A) $340 U 
B) $760 F 
C) $340 F 
D) $760 U

Quizplus · Accepted Answer

The activity variance is the difference between the actual hours worked and the budgeted hours allowed for the actual output. In this case, the actual hours worked were 1,200 and the budgeted hours allowed were 1,100. The difference is 100 hours. The standard labor rate is $7.60 per hour, so the activity variance is 100 hours x $7.60 per hour = $760 F.

Luc Corporation Manufactures and Sells a Single Product