Question

Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. Total cost of supplies in June was $2,000. Calculate the spending variance for June. a. $125 U b. $200 U c. $200 F d. $125 F

Answer 1

a. $125 U

Step-by-step explanation:

The computation of the spending variance is shown below:

= Flexible cost - actual cost

where,

Flexible cost = 2,500 manicures × $0.75 = $1,875

And, the actual cost is $2,000

Now put these values to the above formula

So, the value would equal to

= $1,875 - $2,000

= $125 U

It shows a difference between the actual cost and the flexible cost. Since the flexible cost is less than the actual cost so, it is unfavorable otherwise it would be favorable