Herrod Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $490 per month plus $109 per job plus $29 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in December to be 19 jobs and 129 meals, but the actual activity was 12 jobs and 112 meals. The actual cost for catering supplies in December was $5,630. The spending variance for catering supplies in December would be closest to:
A) $584 F
B) $672 F
C) $584 U
D) $672 U

Question

Quizplus · Accepted Answer

The flexible budget amount for catering supplies in December can be calculated using the cost formula provided:
$490 + ($109 x 12 jobs) + ($29 x 112 meals) = $490 + $1,308 + $3,248 = $5,046

The spending variance can then be calculated by subtracting the flexible budget amount from the actual cost:
$5,630 - $5,046 = $584 U

Therefore, the spending variance for catering supplies in December is $584 U (Choice C).

Herrod Catering Uses Two Measures of Activity, Jobs and Meals