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Computing the Activity Variance

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Venanzi Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $40,720 per month plus $2,646 per flight plus $11 per passenger. The company expected its activity in September to be 62 flights and 288 passengers, but the actual activity was 64 flights and 289 passengers. The actual cost for plane operating costs in September was $214,430. The activity variance for plane operating costs in September would be closest to:

Question 2 answers
a. $6,490 U
b. $5,303 F
c. $6,490 F
d. $5,303 U

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Solution Summary

This solution illustrates how to compute an activity variance.

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An activity variance isolates activity for the month by pricing actual activity at standard costs and comparing that to standard activity at standard costs.

Actual activity at standard costs:

64 flights @ $2,646 per flight ...

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