Hammes Corporation manufactures and sells a single product.The company uses units as the measure of activity in its budgets and performance reports.During February, the company budgeted for 5, 500 units, but its actual level of activity was 5, 510 units.The company has provided the following data concerning the formulas to be used in its budgeting: The activity variance for net operating income in February would be closest to:
A)$191 U
B)$1, 651 U
C)$191 F
D)$1, 651 F

Question

Hammes Corporation manufactures and sells a single product.The company uses units as the measure of activity in its budgets and performance reports.During February, the company budgeted for 5, 500 units, but its actual level of activity was 5, 510 units.The company has provided the following data concerning the formulas to be used in its budgeting:  The activity variance for net operating income in February would be closest to:
A)$191 U 
B)$1, 651 U 
C)$191 F 
D)$1, 651 F

Quizplus · Accepted Answer

Activity variance for net operating income = (Actual units - Budgeted units) x Budgeted net operating income per unit 
= (5,510 - 5,500) x $35 
= $350 F

Therefore, the closest option is C) $191 F.

Hammes Corporation Manufactures and Sells a Single Product