Question

Im struggling with the U and F problems if you could can you please go over both thank you!

Dubberly Corporation's cost formula for its manufacturing overhead is $31,700 per month plus $54 per machine-hour. For the month of March, the company planned for activity of 8,120 machine-hours, but the actual level of activity was 7,990 machine-hours. The actual manufacturing overhead for the month was $493,910.

The spending variance for manufacturing overhead in March would be closest to:

Multiple Choice

• $23,730 U

• $23,730 F

• $30,750 F

• $30,750 U

Dermody Snow Removal's cost formula for its vehicle operating cost is $3,090 per month plus $339 per snow-day. For the month of December, the company planned for activity of 21 snow-days, but the actual level of activity was 23 snow-days. The actual vehicle operating cost for the month was $10,500. The spending variance for vehicle operating cost in December would be closest to:

rev: 11_08_2017_QC_CS-108685, 11_29_2017_QC_CS-110702

Multiple Choice

• $291 U

• $291 F

• $387 F

• $387 U

Answer 1

1. Spending variance = Flexible Budget-Actual Budget

Actual Budget (Given) = $493,910

Flexible Budget = (Total manufacturing ovehead+Actual level activity*Manufacturing overhead per hour)

=($31,700+7990 machine hour*$54)

= $463,160

Now, Spending Variance,

= $(463,160-493,910)

= $30,750 (U)

So, Option D is correct

2. Spending variance = Flexible Budget-Actual Budget

Flexible Budget = Vehicle operating cost per snow*Actual level of activity

= $339*23 i.e. $7797

= $7797+3090

=$10,887

Actual Budget (Given) = $3090

Now, Spending variance

= $10,887-$10500

= $387 F

So, Option C is correct