Asked by Maxine Wiebenga on Jul 28, 2024
Verified
Rients Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for October. When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October.The spending variance for "Other expenses" for October would have been closest to:
A) $400 F
B) $3,625 F
C) $400 U
D) $3,625 U
Other Expenses
Financial outlays that do not fit into standard cost categories, often including unusual or infrequent costs.
Spending Variance
The difference between the actual amount spent in a budget category and the amount that was originally budgeted, indicating over or under-spending.
Customers Served
Refers to the total number of customers who have been provided with a service or product within a specific time frame.
- Isolate and evaluate discrepancies in spending in flexible budgets performance reviews.
Verified Answer
Flexible budget = Fixed cost + (Variable cost per unit x Actual output)
Fixed cost = $8,600
Variable cost per unit = $17 + $19 + $2 = $38
Actual output = 44
Flexible budget = $8,600 + ($38 x 44) = $9,972
Next, we compare the flexible budget to the actual cost incurred for "Other expenses" which is $10,372.
Spending variance = Actual cost - Flexible budget
= $10,372 - $9,972
= $400 U
Therefore, the answer is choice C, $400 U.
Learning Objectives
- Isolate and evaluate discrepancies in spending in flexible budgets performance reviews.
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