Question

Pittman Framing's cost formula for its supplies cost is $1,200 per month plus $20 per frame. For the month of November, the company planned for activity of 618 frames, but the actual level of activity was 610 frames. The actual supplies cost for the month was $13,850. The spending variance for supplies cost in November would be closest to:
$290 U
$450 U
$450 F
$290 F

Answer 1

Answer:

$450 U

Explanation:

Spending Variance for Supplies = Standard Cost - Actual Cost

Standard cost formula = $1,200 per month + $20 per frame

Standard cost for actual output = $1,200 + ($20 $\times$ 610)

= $1,200 + $12,200

= $13,400

Actual cost = $13,850

Spending Variance = $13,400 - $13,850

= -$450 Unfavorable

Since the value is negative the variance is unfavorable as actual cost is more than standard cost of the product.