Paradiso Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,060 patient-visits and the actual level of activity was 1,050 patient-visits. The cost formula for administrative expenses is $3.00 per patient-visit plus $17,000 per month. The actual administrative expense was $19,300. In the clinic's performance report for last month, the spending variance for administrative expenses was:
A)$850 F
B)$220 U
C)$30 F
D)$880 F

Question

Quizplus · Accepted Answer

The spending variance is calculated as the difference between the actual cost and the budgeted cost. The budgeted cost is calculated as the budgeted rate per patient-visit multiplied by the budgeted level of activity, plus the fixed cost. The actual cost is simply the actual administrative expense. In this case, the budgeted cost is $3.00 per patient-visit * 1,060 patient-visits + $17,000 per month = $20,180. The actual cost is $19,300. Therefore, the spending variance is $20,180 - $19,300 = $880 F.

Paradiso Medical Clinic Measures Its Activity in Terms of Patient-Visits