Question

Brittney’s Tile Installation Company measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,360 square feet and the actual level of activity was 1,300 square feet. The company’s owner budgets for supply costs, a variable cost, at $3.90 per square foot. The actual supply cost last month was $4,300. In the company’s flexible budget performance report for last month, what would have been the spending variance for supply costs?

Answer 1

Answer:

$770 favorable

Explanation:

The spending variance for a flexible budget will be calculate as follow:

actual activity x standard rate  - actual cost

1,300 x 3.90 = 5,070 standard cost

actual cost      4,300

Variance:           770 favorable

This variance is favorable, as the actual cost were lower than expected, the company saved cash in the supplies espending.