Teel Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $8,850 per month plus $400 per press run plus $950 per book set-up. The company expected its activity in July to be 204 press runs and 111 book set-ups, but the actual activity was 201 press runs and 110 book set-ups. The actual cost for wages and salaries in July was $193,780.The activity variance for wages and salaries in July would be closest to:
A) $2,150 F
B) $2,120 F
C) $2,150 U
D) $2,120 U

Question

Quizplus · Accepted Answer

The activity variance is calculated as (Actual activity - Budgeted activity) * Standard rate. For press runs, the variance is (201 - 204) * $400 = $1,200 F. For book set-ups, the variance is (110 - 111) * $950 = $950 U. The total activity variance is $1,200 F + $950 U = $2,150 F.

Teel Printing Uses Two Measures of Activity, Press Runs and Book