Kaina Clinic uses client-visits as its measure of activity. During May, the clin

Question

Kaina Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 3,000 client-visits, but its actual level of activity was 2,970 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Actual results for May:

The activity variance for net operating income in May would be closest to:

$396 F

$396 U

$486 F

$486 U

Fixed element per month Variable element per client-visit Revenue - $ 25.80 Personnel expenses $ 20,200 $ 7.10 Medical supplies 900 4.60 Occupancy expenses 5,500 0.70 Administrative expenses 3,500 0.20 Total expenses $ 30,100 $ 12.60

Explanation / Answer

Activity variance = flexible budget - planned activity Flexible budget (2970*13.2 - 30100)= 9104 planned activity (3000*13.2-30100)= 9500 396 U answer net operating income = revenue - variable cost - fixed cost                                       = 25.8-12.60 - 13.2 hence 2970*13.2 - 30100

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