Question

Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,540 per month plus $45 per boat. For the month of April, the company planned for activity of 59 boats, but the actual level of activity was 11 boats. The actual cleaning equipment and supplies for the month was $3,260. The activity variance for cleaning equipment and supplies in April would be closest to:

Answer 1

The activity variance for Pratte Boat Wash's cleaning equipment and supplies in April is the difference between the budgeted cost for 11 boats ($3,035) and the actual cost ($3,260), calculating to be closest to $225.

Step-by-step explanation:

The activity variance for cleaning equipment and supplies in April refers to the difference between the budgeted cost for the actual number of boats cleaned and the actual cost incurred. The budgeted cost for 11 boats is calculated by taking the fixed monthly cost plus the variable cost per boat times the number of boats, which is $2,540 + ($45 × 11 boats) = $2,540 + $495 = $3,035. Comparing this to the actual cost of $3,260, the activity variance is $3,260 - $3,035 = $225. Therefore, the activity variance for cleaning equipment and supplies in April would be closest to $225.

Answer 2

The activity variance for cleaning equipment and supplies in April would be closest to = -$225

Step-by-step explanation:

Cost formula for cleaning equipment and supplies = $2,540 + $45 per boat

Since the actual level of activity is 11 boats the budgeted costs for 11 boats will be $2,540 + $45*11 = $3,035

Actual costs for the 11 boats = $3,260

Activity variance = Budgeted - Actual activity cost = $3,035 - $3,260

= -$225

Since the actual cost of activity is more than budgeted cost of activity, the activity variance is unfavorable and closest to -$225.