Teel Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $4,300 per month plus $401 per press run plus $951 per book set-up. The company expected its activity in July to be 223 press runs and 130 book set-ups, but the actual activity was 220 press runs and 129 book set-ups. The actual cost for wages and salaries in July was $216,880.The spending variance for wages and salaries in July would be closest to:
A) $1,681 U
B) $473 F
C) $1,681 F
D) $473 U

Question

Quizplus · Accepted Answer

The spending variance is the difference between the actual cost and the budgeted cost. The budgeted cost is calculated using the cost formula and the expected activity levels. The actual cost is given.Budgeted cost = $4,300 + ($401 * 223) + ($951 * 130) = $217,353Spending variance = $216,880 - $217,353 = -$473 (favorable)

Teel Printing Uses Two Measures of Activity, Press Runs and Book