Question

Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,530 per month plus $44 per boat. For the month of April, the company planned for activity of 58 boats, but the actual level of activity was 12 boats. The actual cleaning equipment and supplies for the month was $3,160. The spending variance for cleaning equipment and supplies in April would be closest to:_________.

Answer 1

$102 unfavorable

Step-by-step explanation:

The computation of the spending variance is shown below:

= Actual supplies cost - expected supplies cost

where

Actual supplies cost is $3,160

And, the flexible supplies cost would be

= Actual level of activity × price per boat + supplies cost per month

= 12 boats ×$44 + $ 2,530

= $528 + $ 2,530

= $3,058

Now put these values to the above formula

So, the value would equal to

= $3,160 - $3,058

= $102 unfavorable

= $11,389

Now put these values to the above formula

So, the value would equal to

= $11,700 - $11,389

= $311 unfavorable