Chapter 9: Flexible Budgets and Performance Analysis Buckson Framing\'s cost for

Question

Chapter 9: Flexible Budgets and Performance Analysis Buckson Framing's cost formula for its supplies cost is $1,350 per month plus $18 per frame. For the ooune, the company planned for activity of 716 frames, but the actual level of activity was 713 trames. The actual supplies cost for the month was $14,820. The supplies cost in the flexible budget for June would be closest to: a. $14,820 b. $14,184 c. $14,178 d. $14,238 20. Dermody Snow Removal's cost formula for its vehicle operating cost is $2,850 per month plus $317 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,640. The spending variance for vehicle operating cost in December would be closest to a. $282 U b. $282 F c. $352 U d. $352 F

Explanation / Answer

Answer 19

In flexible budget we consider the standard rate with respect to actual level of activity

Therefore , the supplies cost in flexible budget in month of June =

Standard fixrd cost + ( Standard variable cost per unit *  actual level of activity)

= $1,350 + ($18* 713 frames) = $14,184 (ie option b)

Answer 20

Spending variance   = Actual cost - Flexible budget cost

where , Flexible budget cost =  Standard fixrd cost + ( Standard variable cost per unit *  actual level of activity)

= [ $2,850 + ( $317 * 14 snow - day) ] = $7,288

Spending variance for vehicle operating cost = $7,640 - $7,288 = $352 U (ie option c)

Explanation : Since actual operating cost is more than the budgeted operating cost therefore the resultant spending variance is unfavorable (U))

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