Posson Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $210 per month plus $96 per job plus $20 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 20 jobs and 162 meals, but the actual activity was 17 jobs and 164 meals. The actual cost for catering supplies in March was $4,990. The spending variance for catering supplies in March would be closest to:

Question

Posson Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $210 per month plus $96 per job plus $20 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 20 jobs and 162 meals, but the actual activity was 17 jobs and 164 meals. The actual cost for catering supplies in March was $4,990. The spending variance for catering supplies in March would be closest to:

a. $380 F

b. $132 U

c. $132 F

d. $380 U

Answer 1

To calculate the spending variance for catering supplies, we need to compare the budgeted cost to the actual cost.

First, let's calculate the budgeted cost:
Budgeted cost = ($210 per month) + ($96 per job × 20 jobs) + ($20 per meal × 162 meals)
Budgeted cost = $210 + $1,920 + $3,240
Budgeted cost = $4,370

Next, we can calculate the spending variance:
Spending variance = Actual cost - Budgeted cost
Spending variance = $4,990 - $4,370
Spending variance = $620

The spending variance for catering supplies in March is $620.

Now, let's determine if it is favorable or unfavorable.
Since the actual cost is higher than the budgeted cost, the variance is unfavorable (U).

The closest option to $620U is option d. $380U.

Answer 2

To calculate the spending variance for catering supplies, we need to compare the actual cost with the expected cost based on the actual activity.

First, let's calculate the expected cost based on the actual activity:

Expected cost = ($210 per month) + ($96 per job × 17 jobs) + ($20 per meal × 164 meals)
Expected cost = $210 + $1,632 + $3,280
Expected cost = $5,122

Now, we can calculate the spending variance by subtracting the expected cost from the actual cost:

Spending variance = Actual cost - Expected cost
Spending variance = $4,990 - $5,122
Spending variance = -$132

Since the spending variance is negative, it means the actual cost is lower than the expected cost. Therefore, the spending variance for catering supplies in March would be closest to $132 U (option b), indicating an unfavorable variance.