Eberley Corporation's cost formula for its manufacturing overhead is $25,700 per month plus $10 per machine-hour. For the month of July, the company planned for activity of 5,900 machine-hours, but the actual level of activity was 5,920 machine-hours. The actual manufacturing overhead for the month was $86,800.
-The activity variance for manufacturing overhead in July would be closest to:

Question

Quizplus · Accepted Answer

The activity variance is calculated as the difference between the flexible budget and the planning budget. The flexible budget for 5,920 machine-hours is $25,700 + ($10 * 5,920) = $84,900. The planning budget for 5,900 machine-hours is $25,700 + ($10 * 5,900) = $84,700. The activity variance is $84,900 - $84,700 = $200 Unfavorable (U).

Eberley Corporation's Cost Formula for Its Manufacturing Overhead Is $25,700