Paradiso Medical Clinic measures its activity in terms of patient-visits. Last m
ID: 2450978 • Letter: P
Question
Paradiso Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,100 patient-visits and the actual level of activity was 1,090 patient-visits. The cost formula for administrative expenses is $3.40 per patient-visit plus $19,000 per month. The actual administrative expense was $20,500. In the clinic's performance report for last month, the spending variance for administrative expenses was:
A) $2,206 F
B) $820 U
C) $34 F
D) $2,240 F
Paradiso Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,100 patient-visits and the actual level of activity was 1,090 patient-visits. The cost formula for administrative expenses is $3.40 per patient-visit plus $19,000 per month. The actual administrative expense was $20,500. In the clinic's performance report for last month, the spending variance for administrative expenses was:
Explanation / Answer
Spending variance for administrative expenses=
( budgeted rate per patient - visit x actual level of activity ) + budgeted fixed administrative expense-Actual administrative cost incurred.
= $3.40 x 1090 + $19000 - $20,500
=$3706 +$19000 - $20500
=$22706-$20500
=$2206 F - favourable since actual cost is less than budgeted cost .
Answer is,therefore, A.
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