Question

Joe’s Snow Removal's cost formula for its vehicle operating cost is $1,060 per month plus $429 per snow-day. For the month of January, the company planned for activity of 11 snow-days, but the actual level of activity was 13 snow-days. The actual vehicle operating cost for the month was $6,310. The activity variance for vehicle operating cost in January would be closest to:

A. $531 U
B. $531 F
C. $858 U
D. $858 F

Answer 1

Option (C) is correct.

Step-by-step explanation:

Given that,

Vehicle operating cost = $1,060 per month

Vehicle operating cost = $429 per snow-day

Company planned for activity = 11 snow-days

Actual level of activity = 13 snow-days

Actual vehicle operating cost for the month = $6,310

Activity Variance:

= (Budgeted - Actual) × (Budgeted Contribution Margin Per unit)

= (11 - 13) ($429)

= $858 U