Herrod Catering uses two measures of activity, jobs and meals, in the cost formu
ID: 2512654 • Letter: H
Question
Herrod 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 $460 per month plus $106 per job plus $26 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 December to be 16 jobs and 126 meals, but the actual activity was 10 jobs and 133 meals. The actual cost for catering supplies in December was $4,850. The spending variance for catering supplies in December would be closest to:
Explanation / Answer
Spending variance for catering supplies = Flexible budget cost-actual cost
= (460+106*10+26*133)-4850
Spending variance for catering supplies = 128 F