Wexell Framing's cost formula for its supplies cost is $1,230 per month plus $10 per frame. For the month of October, the company planned for activity of 592 frames, but the actual level of activity was 597 frames. The actual supplies cost for the month was $7,050. The activity variance for supplies cost in October would be closest to:
A)$50 F
B)$50 U
C)$100 F
D)$100 U

Question

Quizplus · Accepted Answer

The budgeted supplies cost for 592 frames would be:
$1,230 + ($10 x 592) = $7,930
The actual supplies cost for 597 frames was $7,050.
The flexible budget for 597 frames would be:
$1,230 + ($10 x 597) = $7,827
The activity variance is the difference between the flexible budget and the actual cost:
$7,827 - $7,050 = $777 U
Dividing the activity variance by the actual level of activity gives the activity variance per unit:
$777 ÷ 597 = $1.30
Since the actual level of activity was higher than the budgeted level, the activity variance is unfavorable. The closest answer is therefore B ($50 U).

Wexell Framing's Cost Formula for Its Supplies Cost Is $1,230