Question

Rients Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for October.

	Fixed Element per Month			Variable Element per Customer Served		Actual Total for October
Revenue				$	4,100	$	182,900
Employee salaries and wages	$	42,300		$	1,300	$	98,800
Travel expenses				$	700	$	30,500
Other expenses	$	31,500				$	31,900

When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October.

The spending variance for “Other expenses” for October would have been closest to:

Multiple Choice

• $3,625 F

• $400 U

• $400 F

• $3,625 U

Answer 1

Answer: $400 U

Spending Variance = Actual cost Incurred - Budgeted Cost Estimated

Spedning Varaince for 44 Customers

Spending Variance for Other Expenses = 31900-31500 = 400 Unfavorables