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 3,700 tenant-days, but its actual level of activity was 3,740 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 per month Variable element per tenant-day Revenue - $ 34.60 Wages and salaries $ 2,600 $ 7.60 Food and supplies 1,600 14.10 Facility expenses 8,100 3.10 Administrative expenses 6,600 0.10 Total expenses $ 18,900 $ 24.90 Actual results for March: Revenue $ 125,356 Wages and salaries $ 28,560 Food and supplies $ 54,875 Facility expenses $ 19,150 Administrative expenses $ 7,096 The spending variance for food and supplies in March would be closest to:

Answer 1

Answer:

$541 Unfavorable

Explanation:

Flexible budget for food and supplies = Fixed expenses + (Actual activity * Variable cost per tenant day)

Flexible budget for food and supplies = $1,600 + (3,740 * $14.10)

Flexible budget for food and supplies = $1,600 + $52,734

Flexible budget for food and supplies = $54,334

Spending variance = Actual results - Flexible budget

Spending variance = $54,875 - $54,334

Spending variance = $541 Unfavorable