Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed: Activity Cost Formula
Design $5,000 + $0.05 per machine hour
Machining $25,000 + $0.01 per machine hour
Setups $35 per batch
Purchasing $50 + $15 per purchase order
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase orders
Design $5,080
Machining ?
Setups ?
Purchasing $600
The following variances were given in the activity performance report:
Design ?
Machining $40 F
Setups $15 F
Purchasing ?
What is the activity variance for purchasing?
A) $500 U
B) $100 U
C) $50 U
D) none of these

Question

Quizplus · Accepted Answer

To find the activity variance for purchasing, we need to compare the actual cost of purchasing ($600) to the budgeted cost of purchasing ($50 + $15 x 30 = $450). 
Activity variance for purchasing = Actual cost of purchasing - Budgeted cost of purchasing 
= $600 - $450 = $150 U (unfavorable) 
Therefore, the answer is (B) $100 U, as it is the closest option.