Question

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?

Answer 1

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

Step-by-step 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)