Moncrief Corporation bases its budgets on machine-hours. The company's static planning budget for July appears below: Actual results for the month were:
The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $1,890 U
B) $90 F
C) $90 U
D) $1,890 F

Question

Moncrief Corporation bases its budgets on machine-hours. The company's static planning budget for July appears below:  Actual results for the month were:
 The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $1,890 U 
B) $90 F 
C) $90 U 
D) $1,890 F

Quizplus · Accepted Answer

To find the spending variance for equipment depreciation, we need to compare the actual amount spent on equipment depreciation with the flexible budget amount for equipment depreciation.

Flexible Budget Amount for Equipment Depreciation = Budgeted Machine Hours x Budgeted Depreciation Rate per Machine Hour = 8,400 x $0.30 = $2,520

Actual Amount Spent on Equipment Depreciation = Actual Machine Hours x Actual Depreciation Rate per Machine Hour = 9,000 x $0.27 = $2,430

Spending Variance = Flexible Budget Amount - Actual Amount Spent = $2,520 - $2,430 = $90 U

Therefore, the spending variance for equipment depreciation in the flexible budget performance report for the month is $90 U, so the best choice is C.

Moncrief Corporation Bases Its Budgets on Machine-Hours