Medlar Corporation's static planning budget for June appears below. The company bases its budgets on machine-hours. In June, the actual number of machine-hours was 9,300, the actual supplies cost was $19,760, the actual power cost was $35,720, the actual salaries cost was $27,130, and the actual equipment depreciation was $39,430.The spending variance for supplies cost in the flexible budget performance report for the month should be:
A) $180 U
B) $700 U
C) $700 F
D) $180 F

Question

Medlar Corporation's static planning budget for June appears below. The company bases its budgets on machine-hours.  In June, the actual number of machine-hours was 9,300, the actual supplies cost was $19,760, the actual power cost was $35,720, the actual salaries cost was $27,130, and the actual equipment depreciation was $39,430.The spending variance for supplies cost in the flexible budget performance report for the month should be:
A) $180 U 
B) $700 U 
C) $700 F 
D) $180 F

Quizplus · Accepted Answer

Flexible budget for supplies cost = (2 x 9,300) + $9,000 = $27,600
Actual supplies cost = $19,760
Spending variance = Actual - Flexible budget = $19,760 - $27,600 = $7,840 F
Therefore, the spending variance for supplies cost in the flexible budget performance report for the month is $700 F. Option C is the closest answer.

Medlar Corporation's Static Planning Budget for June Appears Below