Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,590 per month plus $50 per boat. For the month of April, the company planned for activity of 55 boats, but the actual level of activity was 14 boats. The actual cleaning equipment and supplies for the month was $3,350.The spending variance for cleaning equipment and supplies in April would be closest to:

Question

Quizplus · Accepted Answer

The spending variance is calculated as the difference between the actual costs and the budgeted (or expected) costs based on the actual activity level. The budgeted cost for 14 boats is $2,590 (fixed cost) + $50 * 14 (variable cost) = $2,590 + $700 = $3,290. The actual cost was $3,350. Therefore, the spending variance is $3,350 - $3,290 = $60 Unfavorable (U), because the actual cost was higher than the budgeted cost.

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