Question

Company is a popular car-wash operation that measures its activity in terms of number of cars washed. Last month, the budgeted level of activity was 1,240 cars washed and the actual level of activity was 1,230 cars washed. The cost formula for the washing expenses is $4.80 per car washed plus $26,000 per month. The actual washing expense was $25,000.

Required:
What was the spending variance for the washing expenses last month?

Answer 1

Answer: $6,904 favorable

Step-by-step explanation:

Cost formula is $4.80 per car + $26,000.

1,230 cars were actually washed last month.

Budget for washing expense = (4.80 * 1,230) + 26,000

= $31,904

Actual washing expense = $25,000

Variance = Budgeted - Actual

= 31,904 - 25,000

= $6,904 favorable