Question

TB MC Qu. 9-221 Piechocki Corporation manufactures...

Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 7,000 units, but its actual level of activity was 6,950 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

	Fixed element per month			Variable element per unit
Revenue		-		$	34.50
Direct labor	$	0		$	6.50
Direct materials		0			14.10
Manufacturing overhead		40,000			2.00
Selling and administrative expenses		25,800			0.50
Total expenses	$	65,800		$	23.10

Actual results for May:

Revenue	$	241,350
Direct labor	$	45,210
Direct materials	$	99,030
Manufacturing overhead	$	45,000
Selling and administrative expenses	$	30,500

The spending variance for direct materials in May would be closest to:

Answer 1

Spending variance for materials

= (Actual units * budgeted direct materials cost) - Actual direct materials cost

= (6950 * 14.10) - 99,030

= 97,995-99,030

= 1035 U