Ramkissoon Midwifery's cost formula for its wages and salaries is $2,060 per month plus $442 per birth. For the month of July, the company planned for activity of 117 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $54,500. The spending variance for wages and salaries in July would be closest to:
A) $726 U
B) $2,052 F
C) $2,052 U
D) $726 F

Question

Quizplus · Accepted Answer

First, calculate the budgeted wages and salaries: 
$2,060 per month + ($442 per birth x 117 births) = $53,374

Then, calculate the actual cost per birth: 
$54,500 ÷ 114 = $478.07

Next, calculate the expected cost per birth: 
$53,374 ÷ 117 = $455.94

Finally, calculate the spending variance: 
($478.07 - $455.94) x 114 = $2,492.98

Since the actual cost was higher than the expected cost, the variance is unfavorable (F). And since the spending variance is $2,492.98, the closest answer option is C) $2,052 U (since it is the closest to $2,492.98 and represents an unfavorable variance).

Ramkissoon Midwifery's Cost Formula for Its Wages and Salaries Is