Question

Mondo Snow Removal's cost formula for its vehicle operating cost is $1,220 per month plus $657 per snow-day. For the month of January, the company planned for activity of 26 snow-days, but the actual level of activity was 30 snow-days. The actual vehicle operating cost for the month was $20,520. The activity variance for vehicle operating cost in January would be closest to:

$2,218F

$2,628U

$2,218U

$2,628F

Answer 1

		An Activity Variance is difference between the level of activity assumed in the planning budget and actual level of activity used in flexible budget.
		Static Activity:
		26
		Cost at Static Activity:
		1220+657(26)
	A	18302
		Actual Activity:
		30
		Cost at Actual Activity basis budget:
		1220+657(30)
	B	20930
		Activity Variance:
		A-B
		(18302-20930)
		-2628	U