Activity Variance Question Need Help

Question

Carnation's Roof Repair has provided the following information concering its budgeted costs:

Wages and Salaries Fixed Cost per month : $21,380 Cost Per Repair Hour : $15.80

Parts and Supploies Fixed Cost per month : 0 Cost Per Repair Hour : $7.50

Equipment Depreciation : Fixed Cost per month $2,740 Cost per Repair Hour : $0.60

Truck Operating Expenses : Fixed Cost Per month : $5,820 Cost per Repair Hour : $1,90

Rent : Fixed Cost Per month : $4,650 Cost Per Repair Hour : $1.90

Admin Expenses : Fixed Cost Per Month : $3,870 Cost Per Repair Hour : $0.70

Wages and salaries should be $21,380 plus $15.80 per repair hour. The company expected to work 2,500 repair hours in June but actually worked 2,400 repair hours. The company expects its sales to be $43.50 per repair hour. What is the activity variance for net operating income? (Choose the closest answer)

A) $4350 Favorable

B) $2650 Favorable

C) $2650 Unfavorable

D) $1700 Unfavorable

E) $1,700 Favorable

Answer was D) but I need help with steps as to how. Thanks.

Answer 1

                                                @2500 Repair Hrs                     @2400 Repair Hrs

Sales @43.5/repair hr                        $108,750                                 $104,400

 

Wages and Salaries Fixed Cost             $21,380                                     21,380

labor Cost Per Repair hr $15.80             39,500                                     37,920

Parts&Supplies Fixed Cost $7.50            18,750                                     18,000

Equip. Dep.Fixed Cost repair hr $0.60      1,500                                       1,440

Truck Expenses per Repair Hour : $1.90  4,750                                        4560

Rent  Cost Per Repair Hour : $1.90          4,750                                      4,750 (Rent no change)

Admin Expenses Per Repair Hour 0.70      1,750                                      1,680

Total Expenses                                       92,380                                   89,730

Net Op. Income                                      16,370                                   14,670   

 

The activity variance for net operating income =14,670 Actual- 16,370 budget= 1,700 Unfavorable (Option D)