Answered Essay: Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one

Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 4,550 tenant-days, but its actual level of activity was 4,500 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

Fixed element per month Variable element per tenant-day
Revenue $ 35.60
Wages and salaries $ 3,900 $ 9.40
Food and supplies 2,250 14.60
Facility expenses 9,900 6.10
Administrative expenses 7,900 0.70
Total expenses $ 23,950 $ 30.80

Actual results for December:

Revenue $ 159,355
Wages and salaries $ 46,485
Food and supplies $ 66,835
Facility expenses $ 37,535
Administrative expenses $ 9,865

The activity variance for administrative expenses in December would be closest to:

A. $35 U

B. $1220U

C. $35 F

D. $1220F

Expert Answer


Budgted administrative expenses=$7900+(0.7*”4550)=$11085

Actual administraitve expenses=$7900+(0.7*4500)=$11050.

Hence activity variance=($11050-$11085)=$35 F(C)(Since actual results are lower than the budgeted expenses;the variance is favourable).(The fixed expenses do not change with change in units].

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