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Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,040 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:



Fixed element per month Variable element per tenant-day
Revenue $ 35.40
Wages and salaries $ 3,000 $ 6.60
Food and supplies 400 12.20
Facility expenses 9,600 2.30
Administrative expenses 7,800 0.20
Total expenses $ 20,800 $ 21.30
Actual results for March:

Revenue $ 69,576
Wages and salaries $ 16,204
Food and supplies $ 25,008
Facility expenses $ 14,122
Administrative expenses $ 8,238

The spending variance for facility expenses in March would be closest to:

a.$78 F

b.$170 U

c.$78 U

d.$170 F

Respuesta :

akiran007

Answer:

d.$170 F

Explanation:

The spending variance= Actual Facility expenses- Budgeted Facility expenses

                                                                                     on actual hours

The spending variance=$ 14,122- (9600+ 2.3* 2040)

The spending variance=$ 14,122- ( 9600+4692)

The spending variance=$ 14,122- 14292= $ 170 favourable

As  actual is lower than the budgeted amount  for actual hours so it is favourable.

If actual was higher the variance would have been unfavourable.

fichoh

The spending variance for facility expenses in March is favorable and it is closest to $170 F

Given the Parameters :

  • Actual facility expenses = $14,122
  • Budgeted facility expenses = $9600 + (2.3 × 2040) = $14,292

The spending variance is defined thus :

  • Actual spending - Budgeted spending

Hence, the variance for facility expenses can be calculated thus :

  • $14122 - $14292 = - $170

Since, it is Budgeted spending exceeds, the actual, then the variance is favorable.

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