Question

Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $580 per month plus $107 per job plus $23 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 15 jobs and 124 meals, but the actual activity was 10 jobs and 129 meals. The actual cost for catering supplies in May was $4,450. The spending variance for catering supplies in May would be closest to:___________.

A: 587U
B: 167U
C: 587F
D: 167F

Answer 1

Direct material price variance= $587 favorable

Step-by-step explanation:

To calculate the direct material spending (price) variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Standard cost= 580 + 107*15 + 23*124= $5,037

Direct material price variance= 5,037 - 4,450

Direct material price variance= $587 favorable