Figure 11-5. Merric Company uses an activity-based costing system.Four activities have been identified.The setup activity uses the number of setups as its cost driver.The following budget information is available for this activity:
The company expects to perform 25 setups in May.
Refer to Figure 11-5.Actual costs incurred were $246,000 fixed and $144,000 variable.If the actual number of setups in May was 30,what is the activity-based flexible budget variance?
A)$15,000 U
B)$15,000 F
C)$12,000 F
D)$12,000 U

Question

Figure 11-5. Merric Company uses an activity-based costing system.Four activities have been identified.The setup activity uses the number of setups as its cost driver.The following budget information is available for this activity:
 The company expects to perform 25 setups in May.
Refer to Figure 11-5.Actual costs incurred were $246,000 fixed and $144,000 variable.If the actual number of setups in May was 30,what is the activity-based flexible budget variance?
A)$15,000 U 
B)$15,000 F 
C)$12,000 F 
D)$12,000 U

Quizplus · Accepted Answer

Flexible budget for setup activity = (Variable cost per setup × Actual number of setups) + Fixed cost
= ($144,000/25 setups × 30 setups) + $246,000
= $578,400

Actual cost incurred = $144,000 variable + $246,000 fixed = $390,000

Activity-based flexible budget variance = Flexible budget - Actual cost incurred
= $578,400 - $390,000
= $188,400 F

Therefore, the correct answer is C) $12,000 F.