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 power cost in the flexible budget performance report for the month should be:
A)$3,570 U
B)$1,170 U
C)$3,570 F
D)$1,170 F

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 power cost in the flexible budget performance report for the month should be:
A)$3,570 U 
B)$1,170 U 
C)$3,570 F 
D)$1,170 F

Quizplus · Accepted Answer

The spending variance is calculated as the difference between the actual cost and the flexible budget cost. If the actual cost is higher than the flexible budget, it results in an unfavorable (U) variance.

Zike Corporation's Static Planning Budget for October Appears Below