Question

The planning budget for October was based on serving 23 customers, but a total of 19 customers were actually served during October. The activity variance for total expenses for October would have been closest to: $6,400 F $6,400 U $7,900 U $7,900 F

Answer 1

$6400 F

Step-by-step explanation:

Note that, The Fixed expense remains constant irrespective of the no. customers served.

Therefore it is irrelevant and won't be used in the calculation of activity variance.

Again an activity variance occurs to the difference between actual level of used flexible budget and assumed in planning budget.

Therefore, calculating activity variance in the given case, it will be following:

Actual expense - Estimated Expense

= (Employee, salary and wages + Travel expenses) per customer X [Planned no. of customers served - Actual no. of customers served]

=$(1100+500) X [23-19]

=$6400 F.