Dunklin Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,620 patient-visits and the actual level of activity was 1,540 patient-visits. The cost formula for administrative expenses is $3.20 per patient-visit plus $14,300 per month. The actual administrative expense was $21,050. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:
A) $118 F
B) $256 F
C) $1,566 U
D) $1,822 U

Question

Quizplus · Accepted Answer

The flexible budget for administrative expenses can be calculated as follows:

Flexible Budget = (Actual Level of Activity x Cost per Visit) + Fixed Cost
Flexible Budget = (1,540 x $3.20) + $14,300
Flexible Budget = $19,688

The spending variance can be calculated as follows:

Spending Variance = Actual Cost - Flexible Budget
Spending Variance = $21,050 - $19,688
Spending Variance = $1,362 U

Therefore, the correct answer is D, $1,822 U.

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