Salling Corporation bases its budgets on machine-hours. The company's static planning budget for May appears below:
-The spending variance for supplies costs in the flexible budget performance report for the month should be:
A) $1,340 U
B) $1,340 F
C) $460 U
D) $460 F

Question

Salling Corporation bases its budgets on machine-hours. The company's static planning budget for May appears below: 
-The spending variance for supplies costs in the flexible budget performance report for the month should be:
A) $1,340 U 
B) $1,340 F 
C) $460 U 
D) $460 F

Quizplus · Accepted Answer

The flexible budget formula for supplies cost is:
Flexible budget for supplies cost = Budgeted variable cost per machine-hour × Actual machine-hours
= $2.30 × 11,000 machine-hours
= $25,300
The actual cost for supplies in May is $25,760. Therefore, the spending variance is:
Spending variance = Actual cost - Flexible budget
= $25,760 - $25,300
= $460 U. Therefore, the correct answer is C.

Salling Corporation Bases Its Budgets on Machine-Hours