Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,040 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:

Fixed element per month Variable element per tenant-day

Revenue $ 35.40

Wages and salaries $ 3,000 $ 6.60

Food and supplies 400 12.20

Facility expenses 9,600 2.30

Administrative expenses 7,800 0.20

Total expenses $ 20,800 $ 21.30

Actual results for March:

Revenue $ 69,576

Wages and salaries $ 16,204

Food and supplies $ 25,008

Facility expenses $ 14,122

Administrative expenses $ 8,238

The spending variance for facility expenses in March would be closest to:

a.$78 F

b.$170 U

c.$78 U

d.$170 F

Question

Business

Chelsea Cummings

12 November, 11:56

Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,040 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:

Fixed element per month Variable element per tenant-day

Revenue $ 35.40

Wages and salaries $ 3,000 $ 6.60

Food and supplies 400 12.20

Facility expenses 9,600 2.30

Administrative expenses 7,800 0.20

Total expenses $ 20,800 $ 21.30

Actual results for March:

Revenue $ 69,576

Wages and salaries $ 16,204

Food and supplies $ 25,008

Facility expenses $ 14,122

Administrative expenses $ 8,238

The spending variance for facility expenses in March would be closest to:

a.$78 F

b.$170 U

c.$78 U

d.$170 F

+1

Answers (1)

Know the Answer?

Madilynn · Answer 1

d.$170 F

Explanation:

The spending variance = Actual Facility expenses - Budgeted Facility expenses

on actual hours

The spending variance=$ 14,122 - (9600 + 2.3 * 2040)

The spending variance=$ 14,122 - (9600+4692)

The spending variance=$ 14,122 - 14292 = $ 170 favourable

As actual is lower than the budgeted amount for actual hours so it is favourable.

If actual was higher the variance would have been unfavourable.