Zike Corporation's static planning budget for October appears below.The company bases its budgets on machine-hours. In October, the actual number of machine-hours was 6, 000, the actual supplies cost was $14, 740, the actual power cost was $49, 170, the actual salaries cost was $15, 390, and the actual equipment depreciation was $63, 670. The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A)$970 F
B)$970 U
C)$2, 330 U
D)$2, 330 F

Question

Zike Corporation's static planning budget for October appears below.The company bases its budgets on machine-hours.  In October, the actual number of machine-hours was 6, 000, the actual supplies cost was $14, 740, the actual power cost was $49, 170, the actual salaries cost was $15, 390, and the actual equipment depreciation was $63, 670. The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A)$970 F 
B)$970 U 
C)$2, 330 U 
D)$2, 330 F

Quizplus · Accepted Answer

To calculate the equipment depreciation spending variance, we need to compare the actual equipment depreciation cost to the flexible budget amount for equipment depreciation.

Flexible budget for equipment depreciation = Budgeted machine-hours x Budgeted depreciation rate per machine-hour
Flexible budget for equipment depreciation = 6,500 x $9 = $58,500

Equipment depreciation spending variance = Actual equipment depreciation cost - Flexible budget for equipment depreciation
Equipment depreciation spending variance = $63,670 - $58,500 = $5,170 U

Therefore, none of the answer choices is correct. The correct answer would be $5,170 U.

Zike Corporation's Static Planning Budget for October Appears Below