Question

Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6.700 units, but its actual level of activity was 6.670 units. The company has provided the following data concerning the formulas to be used in its budgeting: Fixed element per month Variable element per unit $34.00 Revenue $ Direct labor Direct materials Manufacturing overhead Selling and administrative expenses Total expenses 7.20 12.00 1.30 23,200 $63.700 $20.90 The activity variance for dred labor in March would be closest too O $2,405U

Answer 1

An swer: $216 (F) Variable direct labor cost per unit = $7.20 Budgeted units = 6,700 units Actual units 6,670 units Budgeted labor cost Budgeted units x Budgeted labor cost per unit =6,700 units x $7.20 -$48,240 Flexible labor cost Actual units x Budgeted labor cost per unit 6,670 units x $7.20 = $48,024 Activity variance = Budgeted labor cost - Flexible labor cost = $48,240 $48,024 =$216 Flexible labor cost is low er than the Budgeted labor cost. So, the variance is favorable Activity variance $216 (favorable)