Skoff Corporation is a shipping container refurbishment company that measures it

Question

Skoff Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March.

When the company prepared its planning budget at the beginning of March, it assumed that 35 containers would have been refurbished. However, 32 containers were actually refurbished during March.

The spending variance for “Other expenses” for March would have been closest to:

Multiple Choice

$500 U

$500 F

$3,600 F

$3,600 U

Fixed Element per Month Variable Element per Container Refurbished Actual Total for March Revenue $ 4,000 $ 130,000 Employee salaries and wages $ 42,700 $ 1,000 $ 75,600 Refurbishing materials $ 600 $ 18,800 Other expenses $ 37,900 $ 38,400

Explanation / Answer

Budgeted Other expenses for actual activity = 37900 Spending variance for “Other expenses” = 38400-37900 = 500 U Option 1 is correct

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