Diemert Corporation bases its budgets on machine-hours.The company's static planning budget for June appears below: Actual results for the month were: Actual results for the month were: The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A)$4, 250 U
B)$620 F
C)$4, 250 F
D)$620 U

Question

Diemert Corporation bases its budgets on machine-hours.The company's static planning budget for June appears below:  Actual results for the month were:  Actual results for the month were: The spending variance for equipment depreciation in the flexible budget performance report for the month should be:
A)$4, 250 U 
B)$620 F 
C)$4, 250 F 
D)$620 U

Quizplus · Accepted Answer

The flexible budget for equipment depreciation can be calculated by multiplying the actual machine-hours (6,200) by the budgeted rate per machine-hour from the static budget ($0.50). 
Flexible budget for equipment depreciation = 6,200 machine-hours × $0.50 per machine-hour = $3,100 
The actual equipment depreciation cost was $3,720. 
Spending variance = Actual cost - Flexible budget 
Spending variance = $3,720 - $3,100 
Spending variance = $620 F

Diemert Corporation Bases Its Budgets on Machine-Hours