Question

Milot Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for April. Fixed Element per Month Variable Element per Well Serviced Actual Total for April Revenue $ 3,800 $ 112,900 Employee salaries and wages $ 41,400 $ 900 $ 69,500 Servicing materials $ 500 $ 15,100 Other expenses $ 29,600 $ 30,200 When the company prepared its planning budget at the beginning of April, it assumed that 32 wells would have been serviced. However, 29 wells were actually serviced during April. The activity variance for total expenses for April would have been closest to: Multiple Choice $4,200 U $1,000 U $1,000 F $4,200 F

Answer 1

Flexible budget:
Employee salaries and wages	67500	=41400+(29*900)
Servicing materials	14500	=500*29
Other expenses	29600
Total expenses	111600
Planning budget:
Employee salaries and wages	70200	=41400+(32*900)
Servicing materials	16000	=500*32
Other expenses	29600
Total expenses	115800
Activity variance for total expenses	4200 F	=115800-111600
$4,200 F is correct option