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29 November, 23:51

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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  1. 30 November, 00:31
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    -$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.
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