Question

Courington Detailing's cost formula for its materials and supplies is $1,940 per month plus $13 per vehicle. For the month of August, the company planned for activity of 89 vehicles, but the actual level of activity was 54 vehicles. The actual materials and supplies for the month was $2,310. The materials and supplies in the planning budget for August would be closest to:

Answer 1

$332 favorable

Step-by-step explanation:

The computation of the spending variance is shown below:

= Actual supplies cost - flexible supplies cost

where

Actual supplies cost is $2,310

And, the flexible supplies cost would be

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

= 54 vehicles ×$13 + $1,940

= $702 + $1,940

= $2,642

Now put these values to the above formula

So, the value would equal to

= $2,310 - $2,642

= $332 favorable