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 equipment depreciation 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 equipment depreciation in the performance report for the month should be:

Quizplus · Accepted Answer

The formula for calculating equipment depreciation spending variance is:
Actual Equipment Depreciation - Budgeted Equipment Depreciation

Using this formula, we get:

Actual Equipment Depreciation = $63,670
Budgeted Equipment Depreciation = (12,000 machine-hours x $2.00 per machine-hour) = $24,000

Equipment Depreciation Spending Variance = Actual Equipment Depreciation - Budgeted Equipment Depreciation
= $63,670 - $24,000
= $39,670 U

Therefore, the correct answer is B) $970 U, which is the closest option to the calculated variance of $39,670 U.

Zike Corporation's Static Planning Budget for October Appears Below