To calculate the activity variance with respect to Adger Corporation's revenue, we compare the budgeted revenue based on the planned activity level (30 customers) to the revenue that should have been expected based on the actual activity level (35 customers).

Step 1: Identify the revenue components.

• Fixed revenue element: $5,000
• Variable revenue element per customer: $160,000 ÷ 30 customers = $5,333.33 per customer

Step 2: Calculate the expected revenue for both activity levels.

• Budgeted revenue for 30 customers:

  • Revenue = $5,000 (fixed) + ($5,333.33 × 30 customers)
  • Revenue = $5,000 + $160,000
  • Total budgeted revenue = $165,000

• Flexible budget revenue for 35 customers:

  • Revenue = $5,000 (fixed) + ($5,333.33 × 35 customers)
  • Revenue = $5,000 + $186,666.67
  • Total flexible budget revenue = $191,666.67

Step 3: Compute the activity variance.

• Activity variance = Flexible budget revenue - Budgeted revenue
• Activity variance = $191,666.67 − $165,000 = $26,666.67

Since the actual activity level led to higher revenue than planned, this variance is favorable (F).

Conclusion:

• Activity variance for May's revenue = $26,666.67 (F)

Would you like more details on any part of this calculation?

Here are 5 related questions to expand this topic:

1. How would you calculate the activity variance for other expenses?
2. What is the difference between activity variance and spending variance?
3. Can the activity variance for fixed costs ever be favorable or unfavorable?
4. How does Adger Corporation's planning budget differ from its flexible budget?
5. What role do fixed and variable costs play in determining total revenue?

Tip: Always distinguish between fixed and variable elements when calculating variances to avoid misinterpreting results.