Question

Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,340 tenant-days.
The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:

Data used in budgeting:
Fixed element Variable element
per month per tenant-day
Revenue - $34.20
Wages and salaries $2,200 $7.20
Food and supplies 1,200 13.70
Facility expenses 7,700 2.70
Administrative expenses 6,200 0.30
Total expenses $17,300 $23.90
Actual results for March:
Revenue $111,226
Wages and salaries $28,520
Food and supplies $47,305
Facility expenses $15,750
Administrative expenses $7,092

The spending variance for food and supplies in March would be closest to:

a) $895 F b) $895 U c) $347 F d) $347 U

Answer 1

Answer:

d) $347 U

Explanation:

The computation of the spending variance for food and supplies in March is shown below:

= Flexible budget - actual budget

where,

Flexible budget is

= $1,200 + $3,340 × $13.70

= $1,200 + $45,758

= $46,958

And, the actual budget is $47,305

So by considering the above calculation, the spending variance is

= $46,958 - $47,305

= $347 unfavorable