Kara Catering uses two measures of activity, jobs and meals, in the cost formula

Question

Kara Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $310 per month plus $84 per job plus $17 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in July to be 15 jobs and 127 meals, but the actual activity was 14 jobs and 126 meals. The actual cost for catering supplies in July was $3,620. The activity variance for catering supplies in July would be closest to:
A) $109 F
B) $109 U
C) $101 F
D) $101 U

Explanation / Answer

Hi, Please find calculations below: Budgeted Value = 350 + 15 * 84 + 127 * 17 = 3769 Actual Value = 350 + 14*84 + 126 * 17 = 3668 Since Actual Value is less than Budgeted Value, there will be a favorable variance of 101. Therefore option C is correct. Thanks, Aman

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