Fussner Medical Clinic measures its activity in terms of patient-visits. Last mo
ID: 2513812 • Letter: F
Question
Fussner Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,610 patient-visits and the actual level of activity was 1,670 patient-visits. The cost formula for administrative expenses is $3.30 per patient-visit plus $17,900 per month. The actual administrative expense was $24,600. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:
.
Rameriz Company erred in selecting a denominator activity and chose a much higher level than was realistic. This error would most likely result in a large:
$1,387 UExplanation / Answer
Answer a
Spending variance = Budgeted administrative expenses at actual level of activity - Actual administrative expense
= [( $3.30 * 1,670) + $17,900 ] - $24,600 = $23,411 - - $24,600 = $1,189 U
Explanation : Since budgeted expense is less than actual expense , the resultant spending variance is unfavorable.
Answer b
C. Unfavorable overhead volume variance
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