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:

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
Actual results for March:

Revenue $ 69,576
Wages and salaries $ 16,204
Food and supplies $ 25,008
Facility expenses $ 14,122
Administrative expenses $ 8,238

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

a.$78 F

b.$170 U

c.$78 U

d.$170 F

The spending variance for facility expenses in March is favorable and it is closest to $170 F

Given the Parameters :

The spending variance is defined thus :

Hence, the variance for facility expenses can be calculated thus :

Since, it is Budgeted spending exceeds, the actual, then the variance is favorable.

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d.$170 F

Explanation:

The spending variance= Actual Facility expenses- Budgeted Facility expenses

                                                                                     on actual hours

The spending variance=$ 14,122- (9600+ 2.3* 2040)

The spending variance=$ 14,122- ( 9600+4692)

The spending variance=$ 14,122- 14292= $ 170 favourable

As  actual is lower than the budgeted amount  for actual hours so it is favourable.

If actual was higher the variance would have been unfavourable.

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