Newby Company
Newby 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: $\begin{array}{ll}
\text { Fixed costs per month } & \$ 240,000 \
\text { Variable cost per setup } & \$ 5,400
\end{array}$ The company expects to perform 25 setups in June.
-Refer to Newby Company. Actual costs incurred were $246,000 fixed and $144,000 variable. Suppose the actual number of setups in June was 30. What would be the activity-based flexible budget variance?
A) $12,000 U
B) $12,000 F
C) $15,000 U
D) $15,000 F

Question

Quizplus · Accepted Answer

The activity-based flexible budget variance is the difference between the actual costs incurred and the flexible budget amount. The flexible budget amount is calculated by multiplying the actual number of setups by the variable cost per setup and adding the fixed costs per month. In this case, the flexible budget amount is $246,000 + (30 * $5,400) = $354,000. The activity-based flexible budget variance is therefore $354,000 - $246,000 - $144,000 = $12,000 F.