Guareno Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3500 client-visits, but its actual level of activity was 3460 client-visits. The clinic 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 monthVariable element per client-visit Revenue - $44.10 Personnel expenses$35,300 $14.10 Medical supplies 1000 4.80 Occupancy expenses 11,000 1.60 Administrative expenses 4800 0.20 Total expenses$52,100 $20.70 Actual results for December: Revenue$150,055 Personnel expenses$82,755 Medical supplies$17,070 Occupancy expenses$16,030 Administrative expenses$5560 The activity variance for administrative expenses in December would be closest to:

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ANTHOUGOGO ANTHOUGOGO · Answer 1

Answer:

Guareno Clinic

The activity variance for administrative expenses in December is:

= $8.

Explanation:

a) Data and Calculations:

Budgeted client-visits for December = 3,500

Actual client-visits for December = 3,460

Fixed element Variable element Flexible Actual

per month per client-visit Budget

Revenue - $44.10 $152,585 $150,055

Personnel expenses $35,300 $14.10 84,086 82,755

Medical supplies 1,000 4.80 17,608 17,070

Occupancy expenses 11,000 1.60 16,536 16,030

Administrative expenses 4800 0.20 5,492 5,560

Total expenses $52,100 $20.70 $123,722 $121,415

The total variance for administrative expenses in December is equal to:

Actual

$68 ($5,560 - $5,492).

Note that an activity variance arises because of the difference between the flexible budget and the planning budget (static).

Administrative expenses:

Actual level of activity = 3,460 client-visits

Planned level of activity = 3,500 client-visits

Actual level of activity cost = $5,492 ((3,460 * $0.20) + $4,800)

Planned level of activity cost = $5,500 (3,500 * $0.20) + $4,800)

Activity variance = $8 ($5,500 - $5,492)