The following information is used for questions 21-22 Gourley Clinic uses client
ID: 2496750 • Letter: T
Question
The following information is used for questions 21-22 Gourley Clinic uses client-visits as its measure of activity. During August, the clinic budgeted for 3,200 client-visits, but its actual level of activity was 3,160 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: The activity variance for personnel expenses in August would be closest to: The activity variance for administrative expenses in August would be closest to:Petersheim Snow Removal's cost formula for its vehicle operating cost is $1,750 per month plus $484 per snow-day. For the month of November, the company planned for activity of 15 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,360. The vehicle operating cost in the flexible budget for November would be closest to: If the labor efficiency variance is unfavorable, thenExplanation / Answer
21.
Activity variance for personal expenses = (Actual quantity - Budgeted quantity)*Variable cost of personal expense cost per unit
= (3,160 – 3,200)*$10.70
= -40*$10.70
= $428 Unfavorable
Therefore, option D is correct.
22.
Activity variance for personal expenses = (Actual quantity - Budgeted quantity)*Variable cost of administrative expense cost per unit
= (3,160 – 3,200)*$0.30
= -40*$0.30
= $12 Unfavorable
Therefore, option B is correct.
23.
Operating cost in the flexible budget = Budgeted fixed cost + Budgeted variable cost
= $1,750 + (15 snow days*$484 per snow day)
= $1,750 + $7,260
= $9,010
Therefore, option C is correct.
24.
Labor efficiency variance arises between hours estimated to use and actual hours used. Unfavorable variance arises when actual cost or results are more than the budgeted or estimated cost or results.
Therefore, option A is correct.
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