3. Verona Tech is a vocation school. The school bases its budgets on two of stud

Question

3. Verona Tech is a vocation school. The school bases its budgets on two of students and number of courses. The school uses the following data in budgeting: Variable cost per its Variable cost per student Fixed cost course $20 s50 $30 per month $4,000 Faculty wages Course supplies Administrative expenses $2.000 so $1,000 $10 $20 In July, the school budgeted for 300 students and 15 courses. Actual results for the month appear below: Number of Students280 Number of Courses Faculty wages Course supplies Administrative expenses $8,300 21 $4.200 $4,800 What is the spending variance for course supplies (choose the closest answer)? , $100 U B. $50 U C $100 F .550 F E. $350 F

Explanation / Answer

3.

Spending variance = Flexible budget - Actual result

If the amount of an expense presented in the flexible budget is greater than actual amount incurred for that expense, the variance is favorable, otherwise unfavorable.

Cost of course supplies for flexible budget

= Fixed cost per month + Variable cost for 280 students + Variable cost for 21 courses

= $1,000 + (280 x $10) + (21 x $50)

= $4,850

And,

Actual cost of course supplies = $4,800

Therefore,

Spending variance = $4,850 - $4,800 = $50 Favorable

The correct answer is D.

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