#20 Desilu Corporation manufactures and sells a single product. The company uses
ID: 2484683 • Letter: #
Question
#20
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 5,200 units, but its actual level of activity was 5,190 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
$45.70
Direct labor
$0
$6.90
Direct materials
0
19.40
Manufacturing overhead
41,100
1.00
Selling and administrative expenses
27,000
.60
Total expenses
$68,100
$27.90
Actual results for August :
Revenue
$216,000
Direct labor
$29,200
Direct materials
$94,000
Manufacturing overhead
$43,600
Selling and administrative expenses
$28,830
The activity variance for direct labor in August would be closest to:
a. $5,194 U
b. $69 F
c. $69 U
d. $5,194 F
Data used in budgeting:
Fixed element per month
Variable element per unit
Revenue
0
$45.70
Direct labor
$0
$6.90
Direct materials
0
19.40
Manufacturing overhead
41,100
1.00
Selling and administrative expenses
27,000
.60
Total expenses
$68,100
$27.90
Explanation / Answer
Compute the Activity variance for direct Labor in August.
Standard Quantity = 5,200 units
Actual Quantity = 5,190 units
Activity variance of Labor = (Standard Quantity - Actual Quantity) * Standard price
= (5,200 - 5,190)*$6.9
= 10 * $6.9
= $69 Favorable
Therefore, the correct answer is option B.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.