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:

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:

Quizplus · Accepted Answer

The formula for calculating the spending variance is:

Actual Cost - (Budgeted Rate × Actual Activity)

Actual supplies cost = $14,740
Budgeted rate = $2.50 per machine hour
Actual activity = 6,000 machine hours

Budgeted supplies cost = ($2.50 × 6,000) = $15,000

Therefore, the spending variance for supplies cost is:

$14,740 - $15,000 = -$260

Since the actual cost is less than the budgeted cost, the variance is unfavorable or adverse. To convert the variance into positive ($), we need to drop the negative sign:

$260 U

So, the correct option is C) $940 U.

Zike Corporation's Static Planning Budget for October Appears Below