Question

Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $470 per month plus $101 per job plus $24 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 12 jobs and 123 meals, but the actual activity was 9 jobs and 126 meals. The actual cost for catering supplies in May was $4,240. The spending variance for catering supplies in May would be closest to:

Answer 1

Answer:$163  which is favorable

Explanation:

Standard Cost per month is given as =Actual Quantity  ×  Standard Rate

=   Actual activity for number of jobs per month × Standard rate per job  + Actual activity for meals× standard  Rate per meal + Cost of Catering supplies    

=  9 jobs×$101 per job    + 126 meals × $24 per meal  +$470

=  $909 + $3,024  + $470 = $4,403

Also, Spending Variance =  Actual cost of Catering in May- Standard cost of catering per month.

$4,240- $4,403= $163---- Favorable . This is because the actual  cost for catering supplies  is less than the Standard cost estimated.

​