Lauter Printing uses two measures of activity, press runs and book set-ups, in t

Question

Lauter Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $5,300 per month plus $480 per press run plus $1,080 per book set-up. The company expected its activity in October to be 169 press runs and 64 book set-ups, but the actual activity was 167 press runs and 60 book set-ups. The actual cost for wages and salaries in October was $155,690.

The spending variance for wages and salaries in October would be closest to?

Explanation / Answer

Spending variance is the difference between actual expenses incurred and the budgeted allowance based on actual activity worked. Budgeted Spend based on Actual actiivty = $5300 + $480*Actual No of Press Runs + $1080*ActualBook setup = $5300+$480*167 + $1080*60 = 150260 SO Spending Variance = Actual Exp - Budgeted exp for actual activity = $155690 - $150260 = $5430U

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