Question

Jonathan Yardlighting's cost formula for its supplies cost is $1,230 per month plus $10 per light. For the month of November, the company planned for activity of 592 lights, but the actual level of activity was 597 lights. The actual supplies cost for the month was $7,050. The activity variance for supplies cost in November would be closest to:

Answer 1

The activity variance for supplies cost in November would be closest to:

$ 150 Favorable

Working:

Step-1:Calculation of Standard cost
	Standard cost		=	Fixed cost+Variabel cost per unit*Number of units in the month
			=	$       1,230	+	597	*	$          10
			=	$       7,200
Step-2:Calculation of activity variance
	Standard cost			$       7,200
	Actual cost			$       7,050
	Difference in cost			$ 150
	Since Actual cost is not in excess of Standard cost, it is $ 150 Favorable Variance.