Schlick Framing\'s cost formula for its supplies cost is $1,770 per month plus $

Question

Schlick Framing's cost formula for its supplies cost is $1,770 per month plus $11 per frame. For the month of August, the company planned for activity of 617 frames, but the actual level of activity was 625 frames. The actual supplies cost for the month was $8,950. The activity variance for supplies cost in August would be closest to:

$88 U

$393 F

$88 F

$393 U

Schlick Framing's cost formula for its supplies cost is $1,770 per month plus $11 per frame. For the month of August, the company planned for activity of 617 frames, but the actual level of activity was 625 frames. The actual supplies cost for the month was $8,950. The activity variance for supplies cost in August would be closest to:

Explanation / Answer

Activity variance supplies cost = Standard cost or Planned cost – Actual cost incurred

                                                   = [$1,770 + ($11 per frame * 617 frames)] - $8,950

                                                   = ($1,770 + $6,787) - $8,950

                                                   = $8,557 - $8,950

                                                   = -$393 Unfavorable (Due to actual costs are more than the planned costs)   

Therefore, activity variance is $393 U so 4th option is correct.

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