Question

Burau Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 5,500 units, but its actual level of activity was 5,510 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: Fixed Variable clemcnt ccmcnt per month per unit $34.60 Revenuc Direct lahor Dircct matcrials Manufacturing Sclling and administrative expenscs Total expenscs $ 0$6.50 12.40 1.20 21300 040 S59,500 $20.50 38,200 Actual results for January: Revenue Dircct labor Direct materials Manufacturing overhcad Sel 182,316 $36,795 $66,764 $42,822 $24,334 lling and administrative expenses The spending varlance for direct materials in January would be closest to: O $1,436 0 $1,560 U O $1,560 F O $1,436 F

Answer 1

C. $1,560 F

Flexible budget($0 + $12.40 * 5,510)	$68,324
Actual results	$66,764
Spending variance	$1,560

Because the actual expense is less than the flexible budget, the variance is favorable(F).