Kari Kennel Uses Tenant-Days as Its Measure of Activity;an Animal

question 201

Multiple Choice

Kari 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 May, the kennel budgeted for 3, 200 tenant-days, but its actual level of activity was 3, 230 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The administrative expenses in the planning budget for May would be closest to:

• A)$7, 879
• B)$7, 806
• C)$7, 960
• D)$7, 969

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Definitions:

Volume Variance

The difference between the budgeted and actual volume of units sold or produced, impacting direct materials, direct labor, and overhead costs.

Fixed Overhead

The regular, recurring expenses that are not affected by the level of business activity, such as rent, salaries, and insurance.

Budget Variance

Budget Variance is the difference between what was budgeted or planned for a particular period and what was actually spent or received.

Variable Overhead

Costs that vary in direct proportion to changes in levels of production or activity, such as materials and labor.