Piechocki Corporation manufactures and sells a single product. The company uses
ID: 2545667 • 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 6,000 units, but its actual level of activity was 5,950 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 per month unit Revenue $33.50 Direct labor Direct materials Manufacturing overhead Selling and administrative expense:s Total expenses 0 5.50 13.10 1.00 0.20 $54, 800 $%19.80 30,000 24,800Explanation / Answer
Because the actual expense is greater than the flexible budget, the variance is unfavorable (U).
Flexible budget ($0 + $13.10 × 5,950) $77,945 Actual results $80,100 Spending variance $2,155