Question

Loggin Midwifery's cost formula for its wages and salaries is $2,380 per month plus $231 per birth. For the month of April, the company planned for activity of 100 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $25,510. The spending variance for wages and salaries in April would be closest to:

Answer 1

$432 favorable

Step-by-step explanation:

budgeted wages for 100 births = $2,380 + ($231 x 100) = $2,380 + $23,100 = $25,480

budgeted wages for 102 births = $2,380 + ($231 x 102) = $2,380 + $23,562 = $25,942

actual wages paid = $25,510

the spending variance = budgeted wages for 102 births - actual wages paid = $25,942 - $25,510 = $432 favorable

the activity variance = budgeted wages for 100 births - budgeted wages for 102 births = $25,480 - $25,942 = -$462 or $462 unfavorable