Questions: Bartosiewicz Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: - Fixed element per month / Variable element per client-visit: - Revenue: 0 / 35.20 - Personnel expenses: 27,200 / 11.20 - Medical supplies: 1,200 / 5.20 - Occupancy expenses: 10,200 / 1.00 - Administrative expenses: 6,200 / 0.30 - Total expenses: 44,800 / 17.70 Actual results for January: - Revenue: 124,670 - Personnel expenses: 72,020 - Medical supplies: 22,764 - Occupancy expenses: 14,620 - Administrative expenses: 8,125 The activity variance for net operating income in January would be closest to:

Solution Steps

To find the activity variance for net operating income, we need to compare the budgeted net operating income at the budgeted level of activity with the budgeted net operating income at the actual level of activity. The activity variance is the difference between these two amounts.

1. Calculate the budgeted revenue and expenses at the budgeted level of activity (3,200 client-visits).
2. Calculate the budgeted revenue and expenses at the actual level of activity (3,180 client-visits).
3. Determine the net operating income for both the budgeted and actual levels of activity.
4. Subtract the net operating income at the actual level of activity from the net operating income at the budgeted level of activity to find the activity variance.

The budgeted revenue at the budgeted level of activity (3,200 client-visits) is calculated as: \[ \text{Budgeted Revenue} = 3200 \times 35.20 = 112640 \]

The budgeted expenses at the budgeted level of activity are calculated as: \[ \text{Budgeted Expenses} = 27200 + 1200 + 10200 + 6200 + (3200 \times (11.20 + 5.20 + 1.00 + 0.30)) = 101440 \]

The budgeted net operating income at the budgeted level is: \[ \text{Budgeted Net Income} = 112640 - 101440 = 11200 \]

The budgeted revenue at the actual level of activity (3,180 client-visits) is: \[ \text{Budgeted Revenue} = 3180 \times 35.20 = 111936 \]

The budgeted expenses at the actual level of activity are calculated as: \[ \text{Budgeted Expenses} = 27200 + 1200 + 10200 + 6200 + (3180 \times (11.20 + 5.20 + 1.00 + 0.30)) = 101086 \]

The budgeted net operating income at the actual level is: \[ \text{Budgeted Net Income} = 111936 - 101086 = 10850 \]

The activity variance is calculated as: \[ \text{Activity Variance} = 10850 - 11200 = -350 \]

Final Answer