Dermody Snow Removal's cost formula for its vehicle operating cost is $2,990 per month plus $329 per snow-day. For the month of December, the company planned for activity of 23 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $10,860. The spending variance for vehicle operating cost in December would be closest to:

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Business

Journey Pham

6 November, 12:58

Dermody Snow Removal's cost formula for its vehicle operating cost is $2,990 per month plus $329 per snow-day. For the month of December, the company planned for activity of 23 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $10,860. The spending variance for vehicle operating cost in December would be closest to:

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Thaddeus Barnes · Answer 1

-$303 Unfavorable

Explanation:

The computation of spending variance is shown below:-

Spending variance = Flexible budget - Actual cost

= (23 * $329 + $2,990) - $10,860

= $7,567 + $2,990 - $10,860

= $10,557 - $10,860

= - $303 Unfavorable

Therefore for computing the spending variance we simply subtracted the actual cost from flexible budget.