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Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,600 per month plus $51 per boat. For the month of April, the company planned for activity of 56 boats, but the actual level of activity was 15 boats. The actual cleaning equipment and supplies for the month was $3,450.

The spending variance for cleaning equipment and supplies in April would be closest to:

(A) $85 F
(B) $2,006 F
(C) $85 U
(D) $2,006 U

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Answer:

The correct answer is C.

Explanation:

Giving the following information:

Fixed cleaning equipment and supplies= $2,600

Variable cleaning equipment and supplies= $51 per boat.

April:

The company planned for an activity of 56 boats, but the actual level of activity was 15 boats. The actual cleaning equipment and supplies for the month was $3,450.

The spending variance= total estimated cost - total actual cost

The spending variance= (2,600 + 15*51) - 3,450= 85 unfavorable

The actual cost was higher than the estimated cost for 15 boats.

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