Question

Assume that the cost formula for one of a company’s variable expenses is $5.00 per unit....

Assume that the cost formula for one of a company’s variable expenses is $5.00 per unit. The company’s actual level of activity was 2,200 units. The spending variance was $800 unfavorable and the activity variance was $1,000 unfavorable. What is the planned level of activity?

a .2400 units

b. 2000 units

c. 2300 units

d. 2100 units

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Answer #1
b. 2000 units
Planned level of activity                  2,000
($10,000/$5)
Actual Activity 2,200 units Spending Variance Flexible Budget 2,200 units Volume Variance Planned Budget units
(1) 2 = (1 - 3) (3) 4 = (3 -5) (5)
Variable Overhead $11,800 $800 U $11,000 $1,000 U $10,000
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