Pollica Corporation's cost formula for its selling and administrative expense is $11,400 per month plus $94 per unit. For the month of March, the company planned for activity of 5,700 units, but the actual level of activity was 5,660 units. The actual selling and administrative expense for the month was $522,860.
-The activity variance for selling and administrative expense in March would be closest to:
A) $24,340 F
B) $24,340 U
C) $3,760 U
D) $3,760 F

Question

Quizplus · Accepted Answer

The activity variance is calculated by comparing the planned expense to the flexible budget expense based on actual activity. The planned expense is $11,400 + ($94 * 5,700) = $548,400. The flexible budget expense is $11,400 + ($94 * 5,660) = $546,440. The variance is $546,440 - $548,400 = -$1,960, which is favorable (F) because the actual activity was less than planned, leading to lower costs.

Pollica Corporation's Cost Formula for Its Selling and Administrative Expense