Question

Petroski Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 19,700 skeins and the actual level of activity was 19,900 skeins. The company's owner budgets for dye costs, a variable cost, at $0.67 per skein. The actual dye cost last month was $13,910. In the company's performance report for last month, what would have been the spending variance for dye costs?

Answer 1

Answer:

$577 Unfavorable

Explanation:

The calculation of spending variance for dye costs is shown below:-

Spending variance for dye cost = (Standard rate - Actual variable) × Actual units

= ($0.67 - $13,910 ÷ 19,900) × 19,900

= (0.67 - 0.69899) × 19,900

= $577 Unfavorable

Therefore for computing the spending variance for dye costs we simply applied the above formula.