Younker Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for April. When the company prepared its planning budget at the beginning of April, it assumed that 31 containers would have been refurbished. However, 34 containers were actually refurbished during April.The spending variance for "Other expenses" for April would have been closest to:
A) $3,203 F
B) $500 F
C) $500 U
D) $3,203 U

Question

Younker Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for April.  When the company prepared its planning budget at the beginning of April, it assumed that 31 containers would have been refurbished. However, 34 containers were actually refurbished during April.The spending variance for "Other expenses" for April would have been closest to:
A) $3,203 F 
B) $500 F 
C) $500 U 
D) $3,203 U

Quizplus · Accepted Answer

To calculate the spending variance for "Other expenses," we need to first calculate the flexible budget cost for Other expenses using the actual output level of 34 containers:

Flexible budget cost for Other expenses = Budgeted variable cost per container x Actual output + Fixed Other expenses
Flexible budget cost for Other expenses = $100 x 34 + $5,800 
Flexible budget cost for Other expenses = $9,200

Next, we need to compare this flexible budget cost for Other expenses with the actual cost incurred in April:

Spending variance for Other expenses = Actual Other expenses - Flexible budget cost for Other expenses
Spending variance for Other expenses = $9,700 - $9,200
Spending variance for Other expenses = $500 U (Unfavorable)

Therefore, the correct answer is C) $500 U.

Younker Corporation Is a Shipping Container Refurbishment Company That Measures