Answer:
To calculate the activity variance for net operating income, we need to compare the actual results with the budgeted results using the formula:
Activity Variance = (Actual Activity - Budgeted Activity) x Budgeted Rate
The budgeted activity is the number of client-visits, and the budgeted rate is the variable element per client-visit. We can calculate the budgeted activity by dividing the total variable expenses by the variable element per client-visit:
Budgeted Activity = Total variable expenses / Variable element per client-visit
= $19.40 / visit
We can then calculate the budgeted net operating income by subtracting the total budgeted expenses from the budgeted revenue:
Budgeted Net Operating Income = Budgeted Revenue - Total Budgeted Expenses
= $38.20 - $52,300
= -$14,080
(Note that a negative net operating income means that the budgeted expenses exceeded the budgeted revenue.)
Using the actual results for January, we can calculate the actual activity and net operating income:
Actual Activity = Revenue / Variable element per client-visit
= $127,218 / $38.20 per visit
= 3,330 visits
Actual Net Operating Income = Actual Revenue - Actual Expenses
= $127,218 - ($71,860 + $24,058 + $17,371 + $7,547)
= $6,382
Now we can calculate the activity variance for net operating income:
Activity Variance = (Actual Activity - Budgeted Activity) x Budgeted Rate
= (3,330 - 1,400) x $19.40
= $45,064
The expected answer is $188, but the calculated value is $45,064. It is possible that there was an error in the calculations or in the expected answer provided. However, without more information, it is difficult to determine the exact cause of the discrepancy.