Question

Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 5,800 units, but its actual level of activity was 5,760 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

	Fixed element per month			Variable element per unit
Revenue		-		$	29.20
Direct labor	$	0		$	3.80
Direct materials		0			9.90
Manufacturing overhead		38,900			1.50
Selling and administrative expenses		24,500			0.30
Total expenses	$	63,400		$	15.50

Actual results for June:

Revenue	$	170,258
Direct labor	$	21,347
Direct materials	$	54,759
Manufacturing overhead	$	47,430
Selling and administrative expenses	$	26,268

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

Multiple Choice

$548 F

$548 U

$4,394 U

$4,394 F

Answer 1

Answer:- The activity variance for net operating income in June would be closest to= $548 U.

Explanation:-

Trevorrow Corporation
Activity Variances
For the month ended June
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	5800 units*$29.20 per unit =169360	5760 units*$29.20 per unit =168192	-1168	Unfavourable
Less:-Expenses
Direct labor	5800 units*$3.80 per unit =22040	5760 units*$3.80 per unit =21888	152	Favourable
Direct materials	5800 units*$9.90 per unit =57420	5760 units*$9.90 per unit = 57024	396	Favourable
Manufacturing overhead	(5800 units*$1.50 per unit)+38900 =47600	(5760 units*$1.50 per unit)+38900 =47540	60	Favourable
Selling & Admininstartive expenses	(5800 units*$0.30 per unit)+24500 =26240	(5760 units*$0.30 per unit)+24500 =26228	12	Favourable
Total Expenses
Net Operating Income	16060	15512	-548	Unfavourable