Asked by Carli Cacas on Jul 25, 2024
Verified
Brong Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March. When the company prepared its planning budget at the beginning of March, it assumed that 22 containers would have been refurbished. However, 18 containers were actually refurbished during March.The spending variance for "Employee salaries and wages" for March would have been closest to:
A) $3,300 U
B) $3,300 F
C) $300 U
D) $300 F
Employee Salaries
Regular payments made to employees for their service or work, typically on a monthly basis, not directly tied to the amount of hours worked.
Containers Refurbished
The process of restoring used containers to a state of like-new condition.
Spending Variance
The difference between the budgeted amount allocated for an expense and the actual amount spent.
- Appraise the financial efficacy with the aid of flexible budgeting.
- Analyze how employee wages and salaries are managed in the context of budget preparation.
Verified Answer
Budgeted cost for "Employee salaries and wages" = $28,000
Budgeted cost per container = $1,273 ($28,000/22)
Actual cost for "Employee salaries and wages" = $21,294 ($1,183 x 18)
Actual cost per container = $1,183 ($21,294/18)
Therefore, the spending variance for "Employee salaries and wages" for March = Budgeted cost - Actual cost
= $28,000 - $21,294
= $6,706 U
However, we need to find the spending variance per container, so we divide it by the actual number of containers refurbished.
Spending variance per container for "Employee salaries and wages" = $6,706/18
= $372.56 U
Since the question asks for the closest answer, the correct choice is C) $300 U.
Learning Objectives
- Appraise the financial efficacy with the aid of flexible budgeting.
- Analyze how employee wages and salaries are managed in the context of budget preparation.
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