Perla Kennel uses tenant-days as its measure of activity; an animal housed in th
ID: 2806022 • Letter: P
Question
Perla Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 2,251 tenant-days, but its actual level of activity was 2,210 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:
Data used in budgeting:
Fixed element per month
Variable element per tenant-day
Revenue
$
35.10
Wages and salaries
$
3,660
$
7.80
Food and supplies
1,700
9.20
Facility expenses
8,550
5.80
Administrative expenses
10,000
0.70
Total expenses
$
23,910
$
23.50
Actual results for March
Revenue
$
77,021
Wages and salaries
$
20,713
Food and supplies
$
22,537
Facility expenses
$
20,473
Administrative expenses
$
11,592
Fixed element per month
Variable element per tenant-day
Revenue
$
35.10
Wages and salaries
$
3,660
$
7.80
Food and supplies
1,700
9.20
Facility expenses
8,550
5.80
Administrative expenses
10,000
0.70
Total expenses
$
23,910
$
23.50
Explanation / Answer
The spending variance for food and supplies in March would be closest to : $ 505 Unfavorable
Spending variance for food and supplies = $ 1,700 + $ ( 9.20 x 2,210) - $ 22,537 = $ 505 Unfavorable.
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