Danoff Midwifery's cost formula for its wages and salaries is $1,540 per month plus $497 per birth. For the month of March, the company planned for activity of 112 births, but the actual level of activity was 107 births. The actual wages and salaries for the month was $56,850. The activity variance for wages and salaries in March would be closest to:
A)$2,485 U
B)$354 U
C)$2,485 F
D)$354 F

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget amount for wages and salaries using the actual level of activity (107 births):

$1,540 + ($497 x 107) = $56,959

Next, we calculate the activity variance by subtracting the flexible budget amount from the actual amount:

$56,850 - $56,959 = -$109

Since the actual wages and salaries are less than the flexible budget amount, the variance is unfavorable. The closest answer choice is C, $2,485 F, which stands for a favorable variance of $2,485. Therefore, none of the answer choices are correct.

Danoff Midwifery's Cost Formula for Its Wages and Salaries Is