Question

Spending variances are generated when:

a) budgeted costs for planning level of activity are compared with actual costs for the same level.
b) actual costs for the actual level of activity are compared with actual costs for the planning level of activity.
c) budgeted costs for the actual level of activity are compared with actual costs for the same level.
d) budgeted costs for the planning level of activity are compared with budgeted costs for the flexible level of activity.

Answer 1

Answer: c) budgeted costs for the actual level of activity are compared with actual costs for the same level.

Step-by-step explanation:

Spending Variance refers to the calculated difference between the amount that was budgeted for an activity and the actual amount that was spent. For example if you incur an expense of $50 for PlayStation 4 games in January for expected only to spend $40, we can say that you have an UNFAVOURABLE SPENDING VARIANCE of $50 and if vice versa it would be a FAVOURABLE SPENDING VARIANCE.

Spending Variance is usually applied to Direct Labour and Materials and Fixed, Variable and Administrative Overheads in a company to analyze the spending of the company in production.