Boyne University offers an extensive continuing education program in many cities

Question

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool’s monthly planning budget is based on operating 17 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

The planning budget was based on the following assumptions:

$0.13 per mile for gasoline.

$0.08 per mile for oil, minor repairs, and parts.

$32 per automobile per month for outside repairs.

$68 per automobile per month for insurance.

$8,610 per month for salaries and benefits.

$193 per automobile per month for depreciation.

The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool’s performance.

Required:

1. Calculate the spending variances for March. (Round "per mile" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).

Boyne University Motor Pool
Cost Control Report
For the Month Ended March 31 March
Actual Planning
Budget (Over) Under Budget Miles 57,100 49,100 Autos 18 17 Gasoline $ 6,400 $ 6,383 $ (17 ) Oil, minor repairs, parts 4,270 3,928 (342 ) Outside repairs 720 544 (176 ) Insurance 1,280 1,156 (124 ) Salaries and benefits 8,610 8,610 0 Vehicle depreciation 3,474 3,281 (193 ) Total $ 24,754 $ 23,902 $ (852 ) Boyne University Motor Pool Spending Variances For the Month Ended March 31 Gasoline Oil, minor repairs, parts Outside repairs Insurance Salaries and benefits Vehicle depreciation Total None None

Explanation / Answer

Spending variance :

Gasoline 1023 F Oil, minor repairs parts 298 F Outside repairs 144 U Insurance 56 U Salaries and benefits 0 None Vehicle depreciation 0 None Total 1121 F

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