Moorhouse Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,690 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
-The activity variance for personnel expenses in December would be closest to:
A) $2,361 U
B) $71 U
C) $71 F
D) $2,361 F

Question

Moorhouse Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,690 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December: 
-The activity variance for personnel expenses in December would be closest to:
A) $2,361 U 
B) $71 U 
C) $71 F 
D) $2,361 F

Quizplus · Accepted Answer

To calculate the activity variance for personnel expenses, we need to use the following formula:

Activity Variance = (Actual Activity - Budgeted Activity) x Budgeted Rate

In this case, the personnel expenses budgeted rate is $20 per client-visit. Therefore, the activity variance for personnel expenses would be:

Activity Variance = (3,690 - 3,700) x $20
Activity Variance = -$200

Since the result is negative, it means that the actual activity was lower than the budgeted activity, which is expected to result in a negative variance. However, we need to convert the variance to a positive figure to determine whether it is favorable (F) or unfavorable (U). Since the budgeted activity was higher than the actual activity, the variance is unfavorable. Therefore, we can conclude that the activity variance for personnel expenses in December would be $200 unfavorable, which is equivalent to $71 F (when rounded to the nearest whole number).

Moorhouse Clinic Uses Client-Visits as Its Measure of Activity