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17 September, 11:56

Joe's Snow Removal's cost formula for its vehicle operating cost is $1,060 per month plus $429 per snow-day. For the month of January, the company planned for activity of 11 snow-days, but the actual level of activity was 13 snow-days. The actual vehicle operating cost for the month was $6,310. The activity variance for vehicle operating cost in January would be closest to:

A. $531 U

B. $531 F

C. $858 U

D. $858 F

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Answers (1)
  1. 17 September, 13:07
    0
    Option (C) is correct.

    Explanation:

    Given that,

    Vehicle operating cost = $1,060 per month

    Vehicle operating cost = $429 per snow-day

    Company planned for activity = 11 snow-days

    Actual level of activity = 13 snow-days

    Actual vehicle operating cost for the month = $6,310

    Activity Variance:

    = (Budgeted - Actual) * (Budgeted Contribution Margin Per unit)

    = (11 - 13) ($429)

    = $858 U
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