Question

Dermody Snow Removal's cost formula for its vehicle operating cost is $2,850 per month plus $317 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,640. The spending variance for vehicle operating cost in December would be closest to:

Answer 1

Answer:

$352  unfavorable variance

Explanation:

The spending variance operating cost in December can be ascertained by taking the difference between the actual vehicle operating cost of $7,640 and the budgeted vehicle operating cost using actual level of activity

Budgeted vehicle operating cost using actual level of activity=fixed vehicle operating plus variable multiplied by actual level of activity.

fixed vehicle operating cost is $2,850

variable cost per snow day is $317

actual level of activity is 14 snow days

spending variance=$7,640-($2850+($317*14))

                              =$7640-$7288 =$352

Answer 2

Answer:

$352 unfavorable

Explanation:

The spending variance for vehicle operating cost in December can be calculated the difference between actual cost and budgeted vehicle operating cost using actual activity.

As per given data

Budgeted cost = $2,850 + $317 x 14 = $7,288

Actual cost = $7,640

Spending variance = $7,640-$7,288

Spending variance = $352