Salling Corporation bases its budgets on machine-hours. The company's static planning budget for May appears below:
-The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $540 F
B) $10 F
C) $10 U
D) $540 U

Question

Salling Corporation bases its budgets on machine-hours. The company's static planning budget for May appears below: 
-The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $540 F 
B) $10 F 
C) $10 U 
D) $540 U

Quizplus · Accepted Answer

The spending variance is calculated as the difference between the actual spending and the budgeted spending. In this case, the actual spending is $10,000 and the budgeted spending is $10,540. Therefore, the spending variance is $10,000 - $10,540 = -$540. Since the actual spending is less than the budgeted spending, the spending variance is favorable, which is indicated by the "U" in the answer choice.

Salling Corporation Bases Its Budgets on Machine-Hours