Lauter Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $5,300 per month plus $480 per press run plus $1,080 per book set-up. The company expected its activity in October to be 169 press runs and 64 book set-ups, but the actual activity was 167 press runs and 60 book set-ups. The actual cost for wages and salaries in October was $155,690.
-The spending variance for wages and salaries in October would be closest to:
A) $5,430 U
B) $150 U
C) $5,430 F
D) $150 F

Question

Quizplus · Accepted Answer

The expected cost based on actual activity is $5,300 + ($480 * 167) + ($1,080 * 60) = $150,260. The actual cost was $155,690, resulting in a spending variance of $155,690 - $150,260 = $5,430 unfavorable (U).

Lauter Printing Uses Two Measures of Activity, Press Runs and Book