Question

Bernes Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During October, the kennel budgeted for 2,700 tenant-days, but its actual level of activity was 2,720 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		-		$	30.80
Wages and salaries	$	3,300		$	6.10
Food and supplies		600			10.10
Facility expenses		8,800			3.60
Administrative expenses		7,600			0.10
Total expenses	$	20,300		$	19.90

The activity variance for administrative expenses in October would be closest to:

Multiple Choice

• $2 F

• $162 F

• $162 U

• $2 U

Answer 1

Activity variance

= Budgeted - Flexible

= [(2700*0.10)+7600] - [(2720*0.10)+7600]

= 7870 - 7872

= 2 U