Fussner Medical Clinic measures its activity in terms of patient-visits.Last month,the budgeted level of activity was 1,610 patient-visits and the actual level of activity was 1,670 patient-visits.The cost formula for administrative expenses is $3.30 per patient-visit plus $17,900 per month.The actual administrative expense was $24,600.In the clinic's flexible budget performance report for last month,the spending variance for administrative expenses was:
A)$1,387 U
B)$198 U
C)$69 U
D)$1,189 U

Question

Quizplus · Accepted Answer

First, we need to find out the flexible budget for administrative expenses:
Flexible budget for administrative expenses = (Actual activity level * Cost per unit) + Fixed administrative cost
Flexible budget for administrative expenses = (1,670 * 3.30) + 17,900
Flexible budget for administrative expenses = $23,710
Now we can calculate the spending variance:
Spending variance = Actual administrative expenses - Flexible budget for administrative expenses
Spending variance = $24,600 - $23,710
Spending variance = $890 U
Therefore, the correct answer is D) $1,189 U.

Fussner Medical Clinic Measures Its Activity in Terms of Patient-Visits