Deluca Manufacturing prepared the following cost control report for the prior month:

Planning Budget Actual Results Variances

Direct labor hours 30,000 33,000

Direct materials $45,000 $55,000 $10,000 U

Direct labor wages $480,000 $520,000 $40,000 U

Maintenance $125,000 $136,000 $11,000 U

Utilities $82,000 $86,000 $4,000 U

Rent $65,000 $65,000 $0

Depreciation $27,000 $27,000 $0

Total: $824,000 $889,000 $65,000 U

Direct materials and direct labor wages are variable costs; rent and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $35,000; the fixed component of the budgeted utilities cost is $13,000.

Required:

1. What is the spending variance for Utilities?

Question

Myah Watson

Business

16 August, 12:15

Deluca Manufacturing prepared the following cost control report for the prior month:

Planning Budget Actual Results Variances

Direct labor hours 30,000 33,000

Direct materials $45,000 $55,000 $10,000 U

Direct labor wages $480,000 $520,000 $40,000 U

Maintenance $125,000 $136,000 $11,000 U

Utilities $82,000 $86,000 $4,000 U

Rent $65,000 $65,000 $0

Depreciation $27,000 $27,000 $0

Total: $824,000 $889,000 $65,000 U

Direct materials and direct labor wages are variable costs; rent and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $35,000; the fixed component of the budgeted utilities cost is $13,000.

Required:

1. What is the spending variance for Utilities?

+3

Answers (1)

Know the Answer?

Jackson Hardin · Answer 1

The spending variance for Utilities is $ 2,900 (F)

Explanation:

In order to calculate the spending variance for Utilities we woud have to calculate first the Total Budgeted Cost as follows:

Budgeted variable cost for 30000 hours = $ 82,000-13,000 = $ 69,000

Budgeted variable cost for 33000 hours = $ 69,000x (33000/30000)

= $ 75,900

Therefore, Total Budgeted Cost = $ 75,900+13,000 = $ 88,900

Spending Variance = Budgeted Cost-Actual Cost

Spending Variance = $ 88,900 - $86,000

Spending Variance = $ 2,900 (F)

The spending variance for Utilities is $ 2,900 (F)