Question

Tysor Framing's cost formula for its supplies cost is $3,320 per month plus $16 per frame. For the month of July, the company planned for activity of 1040 frames, but the actual level of activity was 1049 frames. The actual supplies cost for the month was $19,864. The spending variance for supplies cost in July would be closest to:

Answer 1

Answer:

$240 Favorable

Explanation:

Cost as per standard

Fixed per month = $3,320

Per frame = $16

Cost for 1049 frames = $3,320 + ($16 $\times$ 1049)

= $3,320 + $16,784 = $20,104

Actual Supplies cost = $19,864

Spending Variance = Standard Cost - Actual Cost

Spending Variance = $20,104 - $19,864 = $240 Favorable

As we see actual cost is less than standard the variance is favorable.

$240 Favorable