Piechocki Corporation manufactures and sells a single product. The company uses
ID: 2512626 • Letter: P
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 8,400 units, but its actual level of activity was 8,450 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 - $ 35.90 Direct labor $ 0 $ 6.50 Direct materials 0 11.90 Manufacturing overhead 41,000 2.20 Selling and administrative expenses 27,200 0.50 Total expenses $ 68,200 $ 21.10 Actual results for May: Revenue $ 302,100 Direct labor $ 54,310 Direct materials $ 99,230 Manufacturing overhead $ 52,000 Selling and administrative expenses $ 30,640 The spending variance for direct materials in May would be closest to:
Explanation / Answer
Calculate spending variance of direct material :
Spending variance of direct material = Actual cost of material-Flexible budget material cost
= 99230-(8450*11.90)
Spending variance of direct material = 1325 F