Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During September, the company budgeted for 6,700 units, but its actual level of activity was 6,750 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

Actual results for September:

-The activity variance for selling and administrative expenses in September would be closest to:
A)$30 F
B)$800 U
C)$30 U
D)$800 F

Question

Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During September, the company budgeted for 6,700 units, but its actual level of activity was 6,750 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

Actual results for September:

-The activity variance for selling and administrative expenses in September would be closest to:

Data used in budgeting:

Actual results for September:

-The activity variance for selling and administrative expenses in September would be closest to:
A)$30 F 
B)$800 U 
C)$30 U 
D)$800 F

Quizplus · Accepted Answer

The activity variance measures the difference between actual expenses and what should have been spent, based on the actual level of activity. Since there is no information given about the actual level of activity, we can assume that it was at the expected level. Therefore, the activity variance for selling and administrative expenses in September would be equal to the difference between actual expenses and budgeted expenses.

Since we do not know the actual amount of expenses and budgeted expenses, we cannot determine the exact amount of the variance. However, we can eliminate answers A and D because they indicate significant variances of $30 or $800, which would suggest a large deviation from the budgeted amount. Answer B indicates a favorable variance of $800, which is unlikely for selling and administrative expenses. Therefore, the best choice is C, which indicates a small unfavorable variance of $30.

Spirer Corporation Manufactures and Sells a Single Product