Question

Speyer medical clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,080 patient-visits and the actual level of activity was 1,070 patient-visits. The cost formula for administrative expenses is $3.20 per patient-visit plus $18,000 per month. The actual administrative expense was $19,900. Last month the clinic's spending variance for administrative expenses was:

Answer 1

The spending variance for administrative expenses at Speyer medical clinic is $1,556 favorable since the actual administrative expense of $19,900 was less than the budgeted amount of $21,456.

Step-by-step explanation:

The question pertains to finding the spending variance for administrative expenses at the Speyer medical clinic. The budgeted administrative expenses can be calculated by using the cost formula ($3.20 per patient-visit plus $18,000 per month) for the budgeted level of activity (1,080 patient-visits), which would amount to (1,080 patient-visits x $3.20/patient-visit) + $18,000 = $21,456. The spending variance is then the difference between the actual administrative expenses and the budgeted administrative expenses. Given the actual administrative expenses are $19,900, the spending variance is $21,456 - $19,900 = $1,556 favorable since the actual expenses were less than what was budgeted.