Zike Corporation's static planning budget for October appears below. The company bases its budgets on machine-hours. In October, the actual number of machine-hours was 6,000, the actual supplies cost was $14,740, the actual power cost was $49,170, the actual salaries cost was $15,390, and the actual equipment depreciation was $63,670. The spending variance for supplies cost in the performance report for the month should be:
A)$940 F
B)$1,630 U
C)$940 U
D)$1,630 F

Question

Zike Corporation's static planning budget for October appears below. The company bases its budgets on machine-hours.  In October, the actual number of machine-hours was 6,000, the actual supplies cost was $14,740, the actual power cost was $49,170, the actual salaries cost was $15,390, and the actual equipment depreciation was $63,670. The spending variance for supplies cost in the performance report for the month should be:
A)$940 F 
B)$1,630 U 
C)$940 U 
D)$1,630 F

Quizplus · Accepted Answer

To calculate the spending variance for supplies cost, we need to compare the actual supplies cost with the budgeted supplies cost based on the actual machine-hours used.

Budgeted supplies cost = Budgeted variable overhead rate x Actual machine-hours 
= $2.45 x 6,000 
= $14,700

Spending variance = Actual supplies cost - Budgeted supplies cost 
= $14,740 - $14,700 
= $40 U

Therefore, the correct answer is C) $940 U.

Zike Corporation's Static Planning Budget for October Appears Below