Bartosiewicz Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 3,500 client-visits, but its actual level of activity was 3,490 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January:
The activity variance for net operating income in January would be closest to:
A) $188 F
B) $7,118 F
C) $188 U
D) $7,118 U

Question

Bartosiewicz Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 3,500 client-visits, but its actual level of activity was 3,490 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting:  Actual results for January:
 The activity variance for net operating income in January would be closest to:
A) $188 F 
B) $7,118 F 
C) $188 U 
D) $7,118 U

Quizplus · Accepted Answer

The activity variance for net operating income can be calculated using the formula:
Activity Variance = (Actual Level of Activity - Budgeted Level of Activity) x Budgeted Variable Cost Per Unit
In this case, the budgeted variable cost per unit is the total variable costs ($103,600) divided by the budgeted number of client visits (3,500), which is $29.60 per client visit.
Using this formula, the activity variance for net operating income in January would be:
(3,490 - 3,500) x $29.60 = $-296
This means that the actual net operating income was $296 lower than the budgeted net operating income.
However, since the question asks for the closest answer, and none of the answer choices are $-296, the best choice would be the answer closest to it, which is C) $188 U. This means that the actual net operating income was $188 higher than the budgeted net operating income.

Bartosiewicz Clinic Uses Client-Visits as Its Measure of Activity