Question

Dermody Snow Removal's cost formula for its vehicle operating cost is $3,000 per month plus $330 per snow-day. For the month of December, the company planned for activity of 24 snow-days, but the actual level of activity was 26 snow-days. The actual vehicle operating cost for the month was $11,190. The spending variance for vehicle operating cost in December would be closest to:

Answer 1

Answer:

390 F

Explanation:

Spending variance is defined as the difference between the actual expenses and planned expenses. It is favorable when the actual expenses is less than planned and vice versa.

Operating cost $3000

Maintenance per snow day - $330

Budgeted snow day - 24

Actual snow day - 26

Actual operating cost - $11,190

Variance

((330*26)+3000 =11580

Actual operating cost = 11,190

Variance = 11580-11190= 390 F

Answer 2

Answer: 390F

Explanation:

Given Data;

Vehicle operating cost = $11,190

Vehicle operating cost ( removal monthly) = $3,000

Actual days = 26

Snow per day = $330

Therefore:

Spending variance for vehicles operation = flexible budget - actual

= $ ( 330 * 26 + 3000 ) - $11,190

= $11,580 - $11,190

= 390F

The spending variance for vehicle operating cost would be closer to 390F in December.