Bessey Hospital bases its budgets on patient-visits. The hospital's static planning budget for January appears below:
-The spending variance for laundry costs in the flexible budget performance report for the month is:

Question

Bessey Hospital bases its budgets on patient-visits. The hospital's static planning budget for January appears below: 
-The spending variance for laundry costs in the flexible budget performance report for the month is:

Quizplus · Accepted Answer

To calculate the spending variance for laundry costs, we need to compare the actual cost incurred with the expected cost based on the flexible budget.

The flexible budget laundry cost for January can be calculated as follows: 
Flexible budget laundry cost = (Budgeted laundry cost per patient-visit x Actual patient-visits) = $3.70 x 7,000 = $25,900

The actual laundry cost incurred in January is given as $25,170 in the flexible budget performance report.

Therefore, the spending variance for laundry costs can be calculated as: 
Spending variance = Actual laundry cost - Flexible budget laundry cost 
= $25,170 - $25,900 
= -$730

Since the actual laundry cost is less than the expected cost based on the flexible budget, the spending variance is unfavorable, indicating an overspending of $730 on laundry costs. Hence, the answer is option C, $730 U (Unfavorable).

Bessey Hospital Bases Its Budgets on Patient-Visits