Dinham Kennel uses tenant-days as its measure of activity; an animal housed in t

Question

Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,040 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:

  

Actual results for March:

The spending variance for facility expenses in March would be closest to:

$78 F

$170 U

$78 U

$170 F

Fixed element per month Variable element per tenant-day Revenue $ 35.40 Wages and salaries $ 3,000 $ 6.60 Food and supplies 400 12.20 Facility expenses 9,600 2.30 Administrative expenses 7,800 0.20 Total expenses $ 20,800 $ 21.30

Explanation / Answer

Facility expenses in flexible budget =9600+(2040*2.3)= 14292 Spending variance for facility expenses = 14292-14122 = 170 F Option 4 is correct

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