Dure Corporation's cost formula for its selling and administrative expense is $24,500 per month plus $1 per unit. For the month of July, the company planned for activity of 7,200 units, but the actual level of activity was 7,160 units. The actual selling and administrative expense for the month was $31,460.The activity variance for selling and administrative expense in July would be closest to:
A) $240 F
B) $40 F
C) $40 U
D) $240 U

Question

Quizplus · Accepted Answer

The activity variance is calculated as the difference between the planned expense and the flexible budget expense based on actual activity. The planned expense is $24,500 + ($1 * 7,200) = $31,700. The flexible budget expense is $24,500 + ($1 * 7,160) = $31,660. The activity variance is $31,700 - $31,660 = $40 F (Favorable).

Dure Corporation's Cost Formula for Its Selling and Administrative Expense