Taussig Snow Removal's cost formula for its vehicle operating cost is $1,880 per month plus $394 per snow-day. For the month of February, the company planned for the activity of 13 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,250. The activity variance for vehicle operating cost in February would be closest to:

a. $394 F
b. $248 U
c. $394 U
d. $248 F

The activity variance for vehicle operating cost in February would be closest to  $394 U.

Explanation:

To calcuate the activity variance for vehicle operating cost in February we have to use calculate first the flexible budget and the planning budget.

Flexible budget= $1,880 + ($394 × 14)=$7,396

Planning budget= $1,880 + ($394 × 13)=$7,002

Hence, the Activity variance=$394

Therefore, as the flexible budget is greater than the planning budget, the variance is unfavorable (U).

The activity variance for vehicle operating cost in February would be closest to  $394 U.

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