Bade Midwifery's cost formula for its wages and salaries is $1,220 per month plus $246 per birth. For the month of October, the company planned for activity of 106 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $27,250. The activity variance for wages and salaries in October would be closest to:

Multiple Choice

$46 U

$984 F

$984 U

$46 F

We can break this problem down by calculating the **planned** and **actual wages and salaries**, then determining the **activity variance**.

### Step 1: Calculate the Planned Wages and Salaries
The cost formula for wages and salaries is given as:
\[
\text{Wages and Salaries} = \$1,220 + \$246 \times \text{Number of Births}
\]
For the planned 106 births, the planned wages and salaries are:
\[
\text{Planned Wages and Salaries} = \$1,220 + \$246 \times 106 = \$1,220 + \$26,076 = \$27,296
\]

### Step 2: Calculate the Actual Wages and Salaries
For the actual 102 births, the actual wages and salaries based on the formula would be:
\[
\text{Actual Wages and Salaries (based on births)} = \$1,220 + \$246 \times 102 = \$1,220 + \$25,092 = \$26,312
\]

### Step 3: Determine the Activity Variance
The **activity variance** compares the planned wages and salaries (based on 106 births) to the actual wages and salaries (based on 102 births). The formula for activity variance is:
\[
\text{Activity Variance} = \text{Planned Wages and Salaries} - \text{Wages and Salaries based on Actual Births}
\]
\[
\text{Activity Variance} = \$27,296 - \$26,312 = \$984
\]

Since the planned wages were higher than the wages based on actual births, this variance is **favorable (F)**.

### Final Answer:
\[
\boxed{984 \, F}
\]

Would you like more details or have any questions?

---

Here are 5 questions to explore:
1. How does a cost formula like this help in budgeting for a business?
2. What other variances can a company calculate using cost formulas?
3. How does the activity variance differ from a spending variance?
4. Why might the actual level of activity be lower than the planned level?
5. How can a company use variance analysis for decision-making?

**Tip:** Always break down a formula problem into smaller steps, solving one part at a time for clarity.

Bade Midwifery's cost formula for its wages and salaries is $1,220 per month plus $246 per birth. For the month of October, the company planned for activity of 106 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $27,250. The activity variance for wages and salaries in October would be closest to: $46 U, $984 F, $984 U, $46 F.

Learn how to calculate the activity variance for wages and salaries using Bade Midwifery's cost formula. This detailed solution covers planned vs. actual wages based on birth activity and explains how to determine a favorable or unfavorable variance. Perfect for college-level accounting and business students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation