Final answer:
The spending variance for Pratte Boat Wash in April is calculated by comparing the expected cost based on actual activity level to the actual cost incurred. With a fixed cost and a variable cost per boat, the expected cost came to $3,342, and the actual cost was $3,470, resulting in a $128 unfavorable variance.
Step-by-step explanation:
The student's question is concerning the calculation of a spending variance for cleaning equipment and supplies in a boat wash company.
A spending variance is the difference between what was actually spent and what was budgeted for. To calculate this, we need to understand the company's cost formula, which in this case is a fixed cost of $2,460 per month, plus a variable cost of $49 per boat. With a planned activity for 58 boats and an actual activity of 18 boats, the expected cost for the actual level of activity can be calculated as follows:
Expected cost = Fixed cost + (Variable cost per boat × Number of actual boats)
Expected cost = $2,460 + ($49 × 18 boats) = $2,460 + $882 = $3,342
Now, the spending variance can be found by subtracting the expected cost from the actual cost:
Spending Variance = Actual cost - Expected cost
Spending Variance = $3,470 - $3,342 = $128
Since the actual cost was higher than the expected cost, the spending variance is unfavorable. Thus, the closest answer to the spending variance for Pratte Boat Wash in April is $128 unfavorable (c).