Sroufe Clinic Bases Its Budgets on the Activity Measure Patient-Visits

question 139

Essay

Sroufe Clinic bases its budgets on the activity measure patient-visits.During July,the clinic planned for 3,500 patient-visits,but its actual level of activity was 4,000 patient-visits.The clinic has provided the following data concerning the formulas it uses in its budgeting: Required:
Prepare a report showing the clinic's activity variances for July.Indicate in each case whether the variance is favorable (F)or unfavorable (U).

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overheads) in the price of a product.

Variable Costing

An accounting method that includes all variable production costs (materials, labor, overhead) in product costs but treats fixed overhead expenses as period costs.

Reconciliation

The process of ensuring two sets of records (usually the balances of two accounts) are in agreement.

Variable Costing

A costing method where only variable production costs are included in product costs, with fixed overhead expenses treated as period costs.