Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,460 per month plus $49 per boat. For the month of April, the company planned for activity of 58 boats, but the actual level of activity was 18 boats. The actual cleaning equipment and supplies for the month was $3,470.The spending variance for cleaning equipment and supplies in April would be closest to:

Question

Quizplus · Accepted Answer

To calculate the spending variance, we need to find the difference between the actual cost and the expected cost.

Expected cost = $2,460 + ($49 x 58 boats) = $5,842
Actual cost = $3,470

Spending variance = Actual cost - Expected cost
Spending variance = $3,470 - $5,842
Spending variance = -$2,372 (negative means unfavorable)

Therefore, the spending variance is $2,372 unfavorable or $2,372 U. However, the options only give us the absolute value of the spending variance. So, the closest option is C, which is $128 unfavorable or $128 U.

Pratte Boat Wash's Cost Formula for Its Cleaning Equipment and Supplies