Kudej 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, 360 per month plus $570 per press run plus $910 per book set-up.The company expected its activity in May to be 194 press runs and 74 book set-ups, but the actual activity was 195 press runs and 72 book set-ups.The actual cost for wages and salaries in May was $188, 370. The activity variance for wages and salaries in May would be closest to:
A)$1, 250 F
B)$2, 090 F
C)$2, 090 U
D)$1, 250 U

Question

Quizplus · Accepted Answer

The activity variance is calculated by comparing the expected cost based on actual activity to the expected cost based on expected activity. The expected cost for the actual activity is $8,360 + ($570 * 195) + ($910 * 72) = $188,370. The expected cost for the expected activity is $8,360 + ($570 * 194) + ($910 * 74) = $189,620. The variance is $189,620 - $188,370 = $1,250, which is favorable (F) because the actual cost is less than the expected cost.

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