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6 December, 17:58

Deluca Manufacturing prepared the following cost control report for the prior month:

Planning Budget Actual Results Variances

Direct labor hours 30,000 33,000

Direct materials $45,000 $55,000 $10,000 U

Direct labor wages $480,000 $520,000 $40,000 U

Maintenance $125,000 $136,000 $11,000 U

Utilities $82,000 $86,000 $4,000 U

Rent $65,000 $65,000 $0

Depreciation $27,000 $27,000 $0

Total: $824,000 $889,000 $65,000 U

Direct materials and direct labor wages are variable costs; rent and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $35,000; the fixed component of the budgeted utilities cost is $13,000.

Required:

1. What is the spending variance for Utilities?

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Answers (1)
  1. 6 December, 21:26
    0
    The spending variance for Utilities is $ 2,900 (F)

    Explanation:

    In order to calculate the spending variance for Utilities we woud have to calculate first the Total Budgeted Cost as follows:

    Budgeted variable cost for 30000 hours = $ 82,000-13,000 = $ 69,000

    Budgeted variable cost for 33000 hours = $ 69,000x (33000/30000)

    = $ 75,900

    Therefore, Total Budgeted Cost = $ 75,900+13,000 = $ 88,900

    Spending Variance = Budgeted Cost-Actual Cost

    Spending Variance = $ 88,900 - $86,000

    Spending Variance = $ 2,900 (F)

    The spending variance for Utilities is $ 2,900 (F)
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Home » Business » Deluca Manufacturing prepared the following cost control report for the prior month: Planning Budget Actual Results Variances Direct labor hours 30,000 33,000 Direct materials $45,000 $55,000 $10,000 U Direct labor wages $480,000 $520,000 $40,000 U
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