Question

Assume that a company's planned level of activity was 3,500 units and its actual level of activity was 4,000 units. The spending variance for one of its mixed expenses was $900 favorable and its activity variance was $200 unfavorable. The total amount of this mixed cost included in the planning budget was $12,000. What is the actual total amount of this mixed expense? Multiple Choice $10,900 $11,700 $13,100 $11,300

Answer 1

The actual total amount of the mixed expense after adjusting for the favorable spending variance and the unfavorable activity variance is $11,300.

Step-by-step explanation:

To calculate the actual total amount of the mixed expense, we first need to take the planned amount and adjust it for the variances. We start with the planned level of activity and the spending and activity variances. Given that the planned budgeted mixed cost for the 3,500 units was $12,000, we have a $900 favorable spending variance, and a $200 unfavorable activity variance, we can compute the actual cost.

The favorable spending variance indicates that the actual expenses were less than planned, so we subtract this from the planned cost. However, the unfavorable activity variance indicates that the actual expenses were higher than expected when adjusting for the level of activity, so we add this to the planned cost.

Thus, the actual total amount of this mixed expense is calculated as follows:

• Planned budgeted cost: $12,000
• Favorable spending variance: -$900
• Unfavorable activity variance: +$200

Actual cost = $12,000 - $900 + $200 = $11,300