Asked by ashaunte wellington on Jul 27, 2024
Verified
Manter Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 6,900 units, but its actual level of activity was 6,940 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting: Actual results for June:
The spending variance for direct materials in June would be closest to:
A) $524 F
B) $20 F
C) $20 U
D) $524 U
Units
A measurement of quantity, used in various contexts to indicate the amount, volume, or number of items or elements.
Spending Variance
The variance between the anticipated budget for an expense and the actual expenditure.
Direct Materials
Raw materials that are directly used in the manufacturing of a product and are easily traceable to that product.
- Examine the distinctions between a range of variances, such as spending, activity, and overall financial revenue and expenditure discrepancies.
Verified Answer
Expected cost of direct materials = Budgeted rate x Actual activity level
Budgeted rate = $6 per pound of direct materials
Actual activity level = 6,940 units x 3 pounds per unit = 20,820 pounds
Expected cost of direct materials = $6 x 20,820 pounds = $124,920
Actual cost of direct materials used = $123,440
Spending variance = Expected cost - Actual cost
Spending variance = $124,920 - $123,440 = $1,480 F
Therefore, the closest answer is B) $20 F, which is off by $1,460 due to rounding.
Learning Objectives
- Examine the distinctions between a range of variances, such as spending, activity, and overall financial revenue and expenditure discrepancies.
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