Kirnon Clinic uses client-visits as its measure of activity. During July, the cl

Question

Kirnon Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 3,350 client-visits, but its actual level of activity was 3,260 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting Fixed Variable element element per per month client-visit Revenue $39.30 Personnel expenses Medical supplies Occupancy expenses Administrative expenses Total expenses $35,300 1,300 8,300 5,300 $50,200 $10.50 7.30 1.30 0.40 $19.50 The activity variance for net operating income in July would be closest to:

Explanation / Answer

net income       = $39.30 - $19.50 19.8 difference in activity = 3350-3260 90 net income activity variance = 19.8*90 1782 U Answer - 1782U (the variance is unfavourable since budegeted units are more than actual activity) (fixed cost is not considered since it remains same under flexible budget and static budget as well)

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