Posson Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $210 per month plus $96 per job plus $20 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 20 jobs and 162 meals, but the actual activity was 17 jobs and 164 meals. The actual cost for catering supplies in March was $4,990. The spending variance for catering supplies in March would be closest to:
A) $380 F
B) $132 U
C) $132 F
D) $380 U

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget for catering supplies based on the actual activity levels.

Flexible budget for catering supplies = $210 + ($96 x 17 jobs) + ($20 x 164 meals) 
= $210 + $1,632 + $3,280 
= $5,122

Next, we need to find the spending variance by subtracting the flexible budget amount from the actual cost:

Spending variance = Actual cost - Flexible budget 
= $4,990 - $5,122 
= -$132

Since the spending variance is negative, we know that the actual cost was less than the flexible budget. However, we need to report the variance as a positive amount, so the final answer is $132 F (or favorable).

Posson Catering Uses Two Measures of Activity, Jobs and Meals