Courington Detailing's cost formula for its materials and supplies is $1,990 per month plus $4 per vehicle. For the month of August, the company planned for activity of 94 vehicles, but the actual level of activity was 54 vehicles. The actual materials and supplies for the month was $2,250.The activity variance for materials and supplies in August would be closest to:
A) $160 U
B) $116 U
C) $116 F
D) $160 F

Question

Quizplus · Accepted Answer

The activity variance for materials and supplies is calculated as the difference between the flexible budget amount and the actual amount. The flexible budget amount for 54 vehicles is calculated as $1,990 (fixed cost) + $4 * 54 (variable cost) = $1,990 + $216 = $2,206. The actual amount is $2,250. Therefore, the activity variance is $2,206 - $2,250 = -$44, which is favorable since the actual cost is higher than the flexible budget. However, the options provided do not directly match this calculation, suggesting a misunderstanding in the calculation process. Given the options, the closest correct approach to calculating the variance based on the expected outcome would involve comparing the planned budget for 94 vehicles to the flexible budget for 54 vehicles, but this does not align with the standard definition of activity variance. Therefore, based on the provided options and typical variance analysis, the correct answer involves a misunderstanding in the calculation process, leading to the selection of option D as the closest match under the assumption of a misinterpretation in the question's intent or a typographical error in the options.

Courington Detailing's Cost Formula for Its Materials and Supplies Is