15 Rogstad Corporation manufactures and sells a single produ

15) Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6,700 units, but its actual level of activity was 6,670 units. The company has provided the following data conceming the formulas to be used in its budgeting: Fixed element Variable element per month per unit Revenue 34.00 Direct labor Direct materials Manufacturing overhead Selling and administrative expenses Total expenses 0 40,500 23,200 S 63.700 1.30 0.40 S 20.90 The activity variance for direct labor in March would be closest to: A) $2,406 UU B) S216 F C) $2,406 F D) S216 U

Solution

B) $216 F

Because the flexible budget is less than the planning budget, the variance is favorable (F).

Planning budget($0 + $7.20 * 6,700)	$48,240
Flexible budget($0 + $7.20 * 6,670)	$48,024
Activity variance	$216