Sissac Catering uses two measures of activity, jobs and meals, in the cost formu
ID: 2497133 • Letter: S
Question
Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $560 per month plus $105 per job plus $21 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 13 jobs and 122 meals, but the actual activity was 8 jobs and 127 meals. The actual cost for catering supplies in May was $3,950. The spending variance for catering supplies in May would be closest to
Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $560 per month plus $105 per job plus $21 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 13 jobs and 122 meals, but the actual activity was 8 jobs and 127 meals. The actual cost for catering supplies in May was $3,950. The spending variance for catering supplies in May would be closest to
Explanation / Answer
Budgeted Cost for 13 jobs and 122 meals
= $560 + 13 * $105 + 122 * $21
+ $4487
Actual activity: 8 jobs and 127 meals
Actual Cost = $3950
Standard cost for actual job
= $560 + 8 * $105 + 127 * $21
= $ 4067
Spending Variance for May
= flexible budget cost - actual cost
= standard cost for actual activity - actual cost
= $4067 - $ 3950
= $117 Favourable