Petrus Framing's cost formula for its supplies cost is $1,730 per month plus $11 per frame. For the month of March, the company planned for activity of 613 frames, but the actual level of activity was 618 frames. The actual supplies cost for the month was $8,670. The activity variance for supplies cost in March would be closest to:
A) $197 U
B) $197 F
C) $55 U
D) $55 F

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget for supplies cost based on the actual level of activity:
$1,730 + ($11 per frame x 618 frames) = $8,568

Next, we can calculate the activity variance:
Actual supplies cost - Flexible budget for supplies cost
$8,670 - $8,568 = $102 F

However, the question asks for the variance per frame (not the total variance), so we need to divide the activity variance by the actual level of activity:
$102 ÷ 618 = $0.165
This is a favorable variance (because actual supplies cost is less than the flexible budget), so we express it as a credit or U:
$0.165 x - 618 frames = -$102.17, which we round to the nearest dollar as $55 U (under applied). Therefore, the closest answer option is C.

Petrus Framing's Cost Formula for Its Supplies Cost Is $1,730