Question

29 Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 5,200 units, but its actual level of activity was 5,160 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June: Data used in budgeting: Fixed element per month Variable element per unit $30.20 Revenue Direct labor Direct materials Manufacturing overhead Selling and administrative expenses Total expenses $ 0 38,300 23,900 $62,200 $ 3.20 11.00 1.30 0.30 $15.80 Actual results for June: Revenue Direct labor Direct materials Manufacturing overhead Selling and administrative expenses $159, 252 $ 15,989 $ 54,525 $ 44,928 $ 25,528 The activity variance for net operating income in June would be closest to: Multiple Choice o o $5,602 F e o $576 U $5.602 U

Answer 1

Budgeted Income Statement
Revenue ( 5,200 x 30.20)	157,040
Expenses:
Direct labor ( 5,200 x 3.20)	-16,640
Direct materials ( 5,200 x 11)	-57,200
Manufacturing overhead ( 38,300+ 5,200 x 1.30)	-45,060
Selling and administrative expense ( 23,900+5,200 x 0.30)	-25,460
Net Operating Income	$12,680

Actual Income Statement
Revenue	159,252
Expenses:
Direct Materials	-54,525
Direct labor	-15,989
Manufacturing overhead	-44,928
Selling and administrative expense	-25,528
Net Operating Income	$18,282

Activity variance for net operating income = Net operating income actual - Net operating income budgeted

= 18,282-12,680

= $5,602 favorable

second option is correct option.

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