Asked by Courtney Gardner on Jul 11, 2024
Verified
Ramkissoon Midwifery's cost formula for its wages and salaries is $2,060 per month plus $442 per birth. For the month of July, the company planned for activity of 117 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $54,500. The spending variance for wages and salaries in July would be closest to:
A) $726 U
B) $2,052 F
C) $2,052 U
D) $726 F
Wages And Salaries
Remuneration provided to workers for their work, encompassing both wages by the hour and set salaries.
Spending Variance
A financial metric indicating the difference between the budgeted or planned amount of expenses and the actual amount spent.
- Evaluate the discrepancies in flexible budgeting, including expenditure and activity variances.
- Compute the cost formula on a per unit and per activity measure basis using the provided data.
Verified Answer
NH
nusrat haqueJul 18, 2024
Final Answer :
C
Explanation :
First, calculate the budgeted wages and salaries:
$2,060 per month + ($442 per birth x 117 births) = $53,374
Then, calculate the actual cost per birth:
$54,500 ÷ 114 = $478.07
Next, calculate the expected cost per birth:
$53,374 ÷ 117 = $455.94
Finally, calculate the spending variance:
($478.07 - $455.94) x 114 = $2,492.98
Since the actual cost was higher than the expected cost, the variance is unfavorable (F). And since the spending variance is $2,492.98, the closest answer option is C) $2,052 U (since it is the closest to $2,492.98 and represents an unfavorable variance).
$2,060 per month + ($442 per birth x 117 births) = $53,374
Then, calculate the actual cost per birth:
$54,500 ÷ 114 = $478.07
Next, calculate the expected cost per birth:
$53,374 ÷ 117 = $455.94
Finally, calculate the spending variance:
($478.07 - $455.94) x 114 = $2,492.98
Since the actual cost was higher than the expected cost, the variance is unfavorable (F). And since the spending variance is $2,492.98, the closest answer option is C) $2,052 U (since it is the closest to $2,492.98 and represents an unfavorable variance).
Learning Objectives
- Evaluate the discrepancies in flexible budgeting, including expenditure and activity variances.
- Compute the cost formula on a per unit and per activity measure basis using the provided data.
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