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Bade Midwifery's cost formula for its wages and salaries is $1,340 per month plus $230 per...

Bade Midwifery's cost formula for its wages and salaries is $1,340 per month plus $230 per birth. For the month of October, the company planned for activity of 114 births, but the actual level of activity was 110 births. The actual wages and salaries for the month was $27,592. The activity variance for wages and salaries in October would be closest to: 


Multiple Choice 

  • $32 U 

  • $920 F 

  • $920 U 

  • $32 F

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Answer: The correct answer is $920 F

Planning Budget = $1,340 + $230 * 114
Planning Budget = $1,340 + $26,220
Planning Budget = $27,560

Flexible Budget = $1,340 + $230 * 110
Flexible Budget = $1,340 + $25,300
Flexible Budget = $26,640

Activity Variance = Planning Budget – Flexible Budget
Activity Variance = $27,560 - $26,640
Activity Variance = $920

The Variance is Favorable because the flexible budget is less than the planning budget.

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