The activity variance for net operating income in October would be:

A) $38,200 F
B) $33,815 F
C) $38,200 U
D) $33,815 U

Question

The activity variance for net operating income in October would be:A)  $38,200 FB)  $33,815 FC)  $38,200 UD)  $33,815 U

Graeson Livingston · Accepted Answer

Final Answer : C, Explanation :  The activity variance is the difference between the actual results and the flexible budget based on actual activity levels.Flexible budget for 10,000 units:Revenue = ($5.50 x 10,000) = $55,000Variable costs = ($1.20 x 10,000) + ($0.45 x 10,000) = $16,500Fixed costs = $30,000Total costs = $46,500Net operating income = $8,500Actual results for 12,000 units:Revenue = ($5.40 x 12,000) = $64,800Variable costs = ($1.15 x 12,000) + ($0.50 x 12,000) = $16,800Fixed costs = $30,000Total costs = $46,800Net operating income = $18,000Flexible budget for 12,000 units:Revenue = ($5.50 x 12,000) = $66,000Variable costs = ($1.20 x 12,000) + ($0.45 x 12,000) = $19,800Fixed costs = $30,000Total costs = $49,800Net operating income = $16,200The activity variance for net operating income is:Actual net operating income - Flexible budget net operating income= $18,000 - $16,200= $1,800 UTherefore, the best choice is C.

The activity variance for net operating income in October would be:

A) $38,200 F
B) $33,815 F
C) $38,200 U
D) $33,815 U

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