Mcdougald Corporation is a service company that measures its output by the number of customers served. The company has providedthe following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March.Variable Elementper CustomerServedFixed Element perActual TotalMonthfor MarchRevenue$6,500$ 169,700Employee salaries and wages2$58,400$1,000$83,200Travel expenses$700$ 18,600Other expenses2$41,500$ 41,900When the company prepared its planning budget at the beginning of March, it assumed that 21 customers would have been served.However, 26 customers were actually served during March.The spending variance for "Employee salaries and wages" for March would have been closest to:O A. $1,200 UO B. $3,800 UO C.$3,800 FO D. $1,200 F

Once the actual expenditure exceeds the planned or average expense, the difference is referred to as an unfavorable variance. A positive variance is the inverse of negative variance. An adverse spending variance does not always imply that a firm is underperforming. It is possible that the criterion utilized as the foundation for the computation was excessively stringent. As a result, every expenditure deviation should be weighed against the assumptions that were utilized to construct the underlying expense standard or budget.Calculation of flexible budget for employee salaries and wages: Flexible Budget= 58,400+ (1000×26) = $84,400 Therefore, flexible budget employee salaries and wages is $84,400. Calculations of spending variance for employee salaries and wages: Spending Variance= $84,400 - $83,200 = $1200 F ...(F=Favourable) Therefore, spending variance= $1200 F. Hence, option D is correct.

Answered: Mcdougald Corporation is a service…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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