Kaaihue Detailing's cost formula for its materials and supplies is $2,750 per month plus $17 per vehicle. For the month of April, the company planned for activity of 95 vehicles, but the actual level of activity was 135 vehicles. The actual materials and supplies for the month was $4,850.
-The spending variance for materials and supplies in April would be closest to:
A) $195 F
B) $485 F
C) $195 U
D) $485 U

Question

Quizplus · Accepted Answer

The spending variance is calculated as (Actual cost - Budgeted cost). The budgeted cost for materials and supplies is $2,750 + ($17 x 95 vehicles) = $4,525. The actual cost is $4,850. Therefore, the spending variance is $4,850 - $4,525 = $325 F. However, since the actual activity level was higher than the budgeted activity level, the spending variance is favorable. Therefore, the correct answer is A) $195 F.

Kaaihue Detailing's Cost Formula for Its Materials and Supplies Is