Question

XYZ Inc.'s cost formula for its supplies cost is $968 per month plus $8 per frame. For the month of November, the company planned for activity of 450 frames, but the actual level of activity was 470 frames. The actual supplies cost for the month was $4,200. The spending variance for supplies cost in November would be closest to

Answer 1

Answer: $528 favorable

Explanation:

The Spending variance for supplies shoes the difference between what the company thought it would spend on supplies and what it actually spends.

Spending variance on supplies = Actual costs - Budgeted costs

Budgeted cost:

= 968 + 8 * 470 frames

= 968 + 3,760

= $4,728

Spending variance on supplies:

= 4,200 - 4,728

= $528 favorable

Variance is favorable when the Budgeted costs are higher than actual costs.