Question

Company is a popular car-wash operation that measures its activity in terms of number of cars washed. Last month, the budgeted level of activity was 1,240 cars washed and the actual level of activity was 1,230 cars washed. The cost formula for the washing expenses is $4.80 per car washed plus $26,000 per month. The actual washing expense was $25,000.

Required:
What was the spending variance for the washing expenses last month?

Answer 1

Answer:

the spending variance is $6,904 favorable

Explanation:

The computation of the spending variance is as follows;

Budgeted Expense is

= 1,230 cars × $4.80 per car + $26,000

=  $5,904 + $26,000

= $31,904

And, the actual expense is $25,000

Therefore, the spending variance is

= $31,904 - $25,00

= $6,904

Therefore, the spending variance is $6,904 favorable