Zike Corporation's static planning budget for October appears below.The company bases its budgets on machine-hours. In October, the actual number of machine-hours was 6, 000, the actual supplies cost was $14, 740, the actual power cost was $49, 170, the actual salaries cost was $15, 390, and the actual equipment depreciation was $63, 670. The spending variance for power cost in the flexible budget performance report for the month should be:
A)$3, 570 U
B)$1, 170 U
C)$3, 570 F
D)$1, 170 F

Question

Zike Corporation's static planning budget for October appears below.The company bases its budgets on machine-hours.  In October, the actual number of machine-hours was 6, 000, the actual supplies cost was $14, 740, the actual power cost was $49, 170, the actual salaries cost was $15, 390, and the actual equipment depreciation was $63, 670. The spending variance for power cost in the flexible budget performance report for the month should be:
A)$3, 570 U 
B)$1, 170 U 
C)$3, 570 F 
D)$1, 170 F

Quizplus · Accepted Answer

To calculate the spending variance for power cost, we need to first find the flexible budget amount for power cost using the budgeted rate per machine-hour ($7.50) and the actual number of machine-hours (6,000):

Flexible budget amount for power cost = Budgeted rate per machine-hour x Actual number of machine-hours 
= $7.50 x 6,000 
= $45,000

Next, we need to compare the flexible budget amount with the actual power cost of $49,170:

Spending variance for power cost = Actual power cost - Flexible budget amount 
= $49,170 - $45,000 
= $4,170 U

Therefore, none of the answer choices are correct.

Zike Corporation's Static Planning Budget for October Appears Below