Monard Clinic uses client-visits as its measure of activity.During January, the clinic budgeted for 3, 700 client-visits, but its actual level of activity was 3, 710 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)$143 U
B)$5, 957 F
C)$143 F
D)$5, 957 U

Question

Monard Clinic uses client-visits as its measure of activity.During January, the clinic budgeted for 3, 700 client-visits, but its actual level of activity was 3, 710 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)$143 U 
B)$5, 957 F 
C)$143 F 
D)$5, 957 U

Quizplus · Accepted Answer

The activity variance measures the difference between the budgeted and actual level of activity. In this case, the budgeted level of activity was 3,700 client-visits and the actual level of activity was 3,710 client-visits.

Using the formulas provided, we can calculate the activity variance for net operating income as follows:

Activity Variance = (Actual Activity - Budgeted Activity) x Budgeted Rate

Activity Variance = (3,710 - 3,700) x $0.04 per client-visit

Activity Variance = $40 x $0.04

Activity Variance = $1.60

The activity variance for net operating income is $1.60. Since the actual level of activity was higher than budgeted, this variance is favorable (or "F"). Therefore, the closest answer choice is C) $143 F.

Monard Clinic Uses Client-Visits as Its Measure of Activity