Piechocki Corporation manufactures and sells a single product. The company uses

Question

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 6,800 units, but its actual level of activity was 6,750 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 Variable element element per unit $34.30 per month Revenue $ 6.30 13.90 Direct labor Direct materials Manufacturing overhead Selling and administrative expenses Total expenses 38,000 25,600 $63,600 1.80 0.30 $22.30 Actual results for May: Revenue Direct labor Direct materials Manufacturing overhead Selling and administrative expenses 30,480 $232,600 41,890 $ 94,925 44,000 The spending variance for direct materials in May would be closest to Multiple Choice $1,100 F $405 F $1,100 U $405 U

Explanation / Answer

Spending variance for direct material = Flexible budget direct material-actual direct material

= (6750*13.90)-94925

Spending variance for direct material = 1100 U

So answer is c) $1100 U

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