Moorhouse Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,690 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
-The spending variance for medical supplies in December would be closest to:
A) $680 F
B) $680 U
C) $725 U
D) $725 F

Question

Moorhouse Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,690 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December: 
-The spending variance for medical supplies in December would be closest to:
A) $680 F 
B) $680 U 
C) $725 U 
D) $725 F

Quizplus · Accepted Answer

The spending variance is calculated by multiplying the difference between the actual and budgeted price per unit by the actual quantity purchased. In this case, the actual price per unit is $10, the budgeted price per unit is $9, and the actual quantity purchased is 70 units. Therefore, the spending variance is (10 - 9) * 70 = $700. Since the actual price per unit is greater than the budgeted price per unit, the spending variance is unfavorable, which is indicated by the letter "U".

Moorhouse Clinic Uses Client-Visits as Its Measure of Activity