Question

Tennies Clinic uses client-visits as its measure of activity. During November, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,790 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for November: Data used in budgeting: Fixed element per month Variable element per client-visit Revenue - $ 36.40 Personnel expenses $ 30,500 $ 11.40 Medical supplies 1,700 6.80 Occupancy expenses 8,600 2.90 Administrative expenses 6,900 0.20 Total expenses $ 47,700 $ 21.30 Actual results for November: Revenue $ 138,146 Personnel expenses $ 73,672 Medical supplies $ 28,292 Occupancy expenses $ 19,101 Administrative expenses $ 7,427 The activity variance for personnel expenses in November would be closest to:

Answer 1

$114 Favorable

Explanation:

For computation of activity variance for personnel expenses first we will find out the planning budget and flexible budget which is shown below:-

Planning Budget = Fixed element of personnel expenses + (Budgeted Client visit × Variable element per client visit of personnel expenses)

= $30,500 + (3,800 × $11.40)

= $30,500 + $43,320

= $73,820

Flexible Budget = Fixed element of personnel expenses + (Actual Client visit × Variable element per client visit of personnel expenses)

= $30,500 + (3,790 × $11.40)

= $30,500 + $43,206

= $73,706

Activity variance = Planning Budget - Flexible Budget

= $73,820 - $73,706

= $114 Favorable