Harville Midwifery's cost formula for its wages and salaries is $1,610 per month plus $199 per birth. For the month of March, the company planned for activity of 118 births, but the actual level of activity was 122 births. The actual wages and salaries for the month was $25,430. The spending variance for wages and salaries in March would be closest to:
A) $458 F
B) $338 U
C) $458 U
D) $338 F

Question

Quizplus · Accepted Answer

The spending variance is calculated as (Actual cost - Budgeted cost). The budgeted cost is calculated as (Fixed cost + Variable cost per unit * Actual activity). The fixed cost is $1,610 per month, the variable cost per unit is $199 per birth, and the actual activity is 122 births. Therefore, the budgeted cost is $1,610 + $199 * 122 = $24,958. The actual cost is $25,430. Therefore, the spending variance is $25,430 - $24,958 = $458 U.

Harville Midwifery's Cost Formula for Its Wages and Salaries Is