Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders
The following variances were given in the activity performance report:
What is the activity variance for design?

A) £40 F
B) £30 U
C) £15 F
D) £100 U

Question

Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders
 The following variances were given in the activity performance report:
 What is the activity variance for design?

A) £40 F 
B) £30 U 
C) £15 F 
D) £100 U

Quizplus · Accepted Answer

The activity variance for design is calculated as Actual cost - (Actual quantity x Budgeted rate), which is £31,500 - (3,500 decals x £9), which equals £3,000 unfavorable. Therefore, the correct answer is choice letter B. No other choices are correct as they do not match the calculation of the activity variance for design.