Manter Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,900 units, but its actual level of activity was 6,940 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting: Actual results for June:
The spending variance for direct materials in June would be closest to:
A) $524 F
B) $20 F
C) $20 U
D) $524 U

Question

Manter Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,900 units, but its actual level of activity was 6,940 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting:  Actual results for June:
 The spending variance for direct materials in June would be closest to:
A) $524 F 
B) $20 F 
C) $20 U 
D) $524 U

Quizplus · Accepted Answer

To calculate the spending variance for direct materials, we need to compare the actual cost of direct materials used to the expected cost based on the budgeted rate and actual activity level.

Expected cost of direct materials = Budgeted rate x Actual activity level
Budgeted rate = $6 per pound of direct materials
Actual activity level = 6,940 units x 3 pounds per unit = 20,820 pounds
Expected cost of direct materials = $6 x 20,820 pounds = $124,920

Actual cost of direct materials used = $123,440

Spending variance = Expected cost - Actual cost
Spending variance = $124,920 - $123,440 = $1,480 F

Therefore, the closest answer is B) $20 F, which is off by $1,460 due to rounding.

Manter Corporation Manufactures and Sells a Single Product