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10 February, 14:59

Taussig Snow Removal's cost formula for its vehicle operating cost is $1,880 per month plus $394 per snow-day. For the month of February, the company planned for the activity of 13 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,250. The activity variance for vehicle operating cost in February would be closest to:

a. $394 F

b. $248 U

c. $394 U

d. $248 F

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  1. 10 February, 16:34
    0
    The activity variance for vehicle operating cost in February would be closest to $394 U.

    Explanation:

    To calcuate the activity variance for vehicle operating cost in February we have to use calculate first the flexible budget and the planning budget.

    Flexible budget = $1,880 + ($394 * 14) = $7,396

    Planning budget = $1,880 + ($394 * 13) = $7,002

    Hence, the Activity variance=$394

    Therefore, as the flexible budget is greater than the planning budget, the variance is unfavorable (U).

    The activity variance for vehicle operating cost in February would be closest to $394 U.
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