Guareno Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3500 client-visits, but its actual level of activity was 3460 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Fixed element per monthVariable element per client-visit Revenue - $44.10 Personnel expenses$35,300 $14.10 Medical supplies 1000 4.80 Occupancy expenses 11,000 1.60 Administrative expenses 4800 0.20 Total expenses$52,100 $20.70 Actual results for December: Revenue$150,055 Personnel expenses$82,755 Medical supplies$17,070 Occupancy expenses$16,030 Administrative expenses$5560 The activity variance for administrative expenses in December would be closest to:

Guareno Clinic

The activity variance for administrative expenses in December is:

= $8.

Explanation:

a) Data and Calculations:

Budgeted client-visits for December = 3,500

Actual client-visits for December = 3,460

                                 Fixed element   Variable element  Flexible   Actual

                                    per month          per client-visit    Budget

Revenue -                                                       $44.10     $152,585  $150,055

Personnel expenses     $35,300                   $14.10         84,086      82,755

Medical supplies                1,000                       4.80         17,608       17,070

Occupancy expenses       11,000                       1.60         16,536       16,030

Administrative expenses   4800                      0.20           5,492        5,560

Total expenses              $52,100                   $20.70   $123,722     $121,415

The total variance for administrative expenses in December is equal to:

Actual

$68 ($5,560 - $5,492).

Note that an activity variance arises because of the difference between the flexible budget and the planning budget (static).

Administrative expenses:

Actual level of activity = 3,460 client-visits

Planned level of activity = 3,500 client-visits

Actual level of activity cost = $5,492 ((3,460 * $0.20) + $4,800)

Planned level of activity cost = $5,500 (3,500 * $0.20) + $4,800)

Activity variance = $8 ($5,500 - $5,492)