Question

Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 4,600 tenant-days, but its actual level of activity was 4,550 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		-		$	35.70
Wages and salaries	$	4,000		$	9.50
Food and supplies		2,300			14.70
Facility expenses		10,000			6.20
Administrative expenses		8,000			0.80
Total expenses	$	24,300		$	31.20

Actual results for December:

Revenue	$	161,570
Wages and salaries	$	47,510
Food and supplies	$	68,065
Facility expenses	$	38,400
Administrative expenses	$	8,620

The activity variance for administrative expenses in December would be closest to:

Answer 1

Activity variance = planning budget - flexible budget

= (4600*0.80 + 8000) - (4550*0.80+8000)

= 40 F

Comment if you face any issues