Question

A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The spending variance is?

Answer 1

Spending variance is 300 Unfavourable.

SR = 7500 / 500 = 15

AR = 9300 / 600 = 15.5

Spending variance = (SR - AR ) AH

= (15 - 15.5 ) 600

= 300 Unfavourable.

Spending variance, also known as rate variance, is the difference between the actual amount of an expense and the budgeted amount. If you have a utility bill of $250 in January and you expect to incur an expense of $150, you have an unfavorable expense variance of $100.

Spending variance is the difference between the actual amount of an expense and the expected (or budgeted) amount. So if a company has spent $500 on utilities in January and plans to spend $400, the result is a $100 unwanted spending difference.

There are many variations in calculating the spending variance for different types of expenses, but the basic formula for this calculation is:

1) Actual Cost - Expected Cost = Expense Variance.

2) (Actual Variable Burden Rate - Projected Variable Burden Rate) x Work Hours = Variable Burden Cost Variance.

Learn more about Spending variance here: brainly.com/question/26082424

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