Desilu Corporation manufactures and sells a single product. The company uses uni

Question

Desilu Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August , the company budgeted for 5,500 units, but its actual level of activity was 5,490 units. Desilu Corporation provides you with the following data concerning the formulas used in its budgeting and its actual results for August :

Data used in budgeting:

Fixed element per month Variable element per unit

Revenue 0 $45.90

Direct labor $0 $6.50

Direct materials 0 20.10

Manufacturing overhead 41,200 1.20

Selling and administrative expenses 26,200 .70

Total expenses $67,400 $28.50

Actual results for August :

Revenue $213,000

Direct labor $29,500

Direct materials $93,700

Manufacturing overhead $43,300

Selling and administrative expenses $28,330

The activity variance for direct labor in August would be closest to:

$65 U

$5,493 F

$5,493 U

$65 F

Explanation / Answer

Direct labour activity variance = (Actual quanity * standard rate per unit) - (Standard quantity * standard rate per unit) Direct labour activity variance = (5490 units * $6.50 per unit) - (5500 units * $6.50 per unit) Direct labour activity variance = $35685 - $35750 = -$65 Unfavourable

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