Question

Dermody Snow Removal's cost formula for its vehicle operating cost is $3,010 per month plus $331 per snow-day. For the month of December, the company planned for activity of 13 snow-days, but the actual level of activity was 15 snow-days. The actual vehicle operating cost for the month was $7,585. The spending variance for vehicle operating cost in December would be closest to:________

Answer 1

$5237

Step-by-step explanation:

The planned snow days is 13 therefore this tells us that they expected these snow days and they budgeted for them so when the actual is 15 snow days we know that this tells that a surplus of 2 snow days was incurred therefore forming part of the variance of the companies costs therefore the variance for snow days is $331 x2 snow days = $662. Then now we will look at the variance vehicle operating costs on a monthly basis which is expected to be $3010 but was $7585 which the variance will be the difference between these two amounts, the formula would be actual costs - expected costs = $7585 - $3010 = $4575 then to get the spending variance for vehicle operating cost in December would be closest to $4575 + $662= $5237 which is the amount they must pay extra than expected for December.

Answer 2

$390F

Step-by-step explanation:

The Dermody variance for vehicle operating cost can be determined using the below mentioned formula:

Dermody vehicle operating cost variance=Planned vehicle operating cost- Actual vehicle operating cost

In the given question

Planned vehicle operating cost=$3,010+$331*15

=$7,975

Actual vehicle operating cost=$7,585

Dermody vehicle operating cost variance=$7,975-$7,585

=$390F