Skagit Clinic measures its activity in patient-visits. In December, the budgeted level of activity was 1,640 patient-visits and the actual level of activity was 1,775 patient-visits. The cost formula for administrative expenses is $2.80 per patient-visit plus $18,700 fixed cost per month. The actual administrative expense for December was $25,225. What was the spending variance for administrative expenses for December?
Skagit Clinic measures its activity in patient-visits. In December, the budgeted level of activity was 1,640 patient-visits and the actual level of activity was 1,775 patient-visits. The cost formula for administrative expenses is $2.80 per patient-visit plus $18,700 fixed cost per month. The actual administrative expense for December was $25,225. What was the spending variance for administrative expenses for December?
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![**Skagit Clinic Patient-Visit Activity and Administrative Expense Analysis**
Skagit Clinic measures its activity in patient-visits.
- **December Budget and Actual Activity:**
- **Budgeted Activity:** 1,640 patient-visits.
- **Actual Activity:** 1,775 patient-visits.
- **Cost Formula for Administrative Expenses:**
- **Variable Cost:** $2.80 per patient-visit.
- **Fixed Cost:** $18,700 per month.
- **December Actual Administrative Expense:**
- Total Expense: $25,225.
**Question:**
What was the spending variance for administrative expenses for December?
**Explanation:**
- To calculate the spending variance, you need to know the expected (budgeted) expense and compare it with the actual expense.
- **Budgeted Expense Calculation:**
\[
\text{Budgeted Expense} = (\text{Variable Cost per Patient-Visit} \times \text{Actual Patient-Visits}) + \text{Fixed Cost}
\]
\[
\text{Budgeted Expense} = ($2.80 \times 1,775) + $18,700 = $4,970 + $18,700 = $23,670
\]
- **Spending Variance Calculation:**
\[
\text{Spending Variance} = \text{Actual Expense} - \text{Budgeted Expense}
\]
\[
\text{Spending Variance} = $25,225 - $23,670 = $1,555
\]
The spending variance for administrative expenses for December was **$1,555**.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7038cbde-5259-4f1b-ade8-fa8f6320a6eb%2Fb2dd9977-86e4-439e-8d1e-2df3b8507ab2%2Fhba20z_processed.png&w=3840&q=75)
Transcribed Image Text:**Skagit Clinic Patient-Visit Activity and Administrative Expense Analysis**
Skagit Clinic measures its activity in patient-visits.
- **December Budget and Actual Activity:**
- **Budgeted Activity:** 1,640 patient-visits.
- **Actual Activity:** 1,775 patient-visits.
- **Cost Formula for Administrative Expenses:**
- **Variable Cost:** $2.80 per patient-visit.
- **Fixed Cost:** $18,700 per month.
- **December Actual Administrative Expense:**
- Total Expense: $25,225.
**Question:**
What was the spending variance for administrative expenses for December?
**Explanation:**
- To calculate the spending variance, you need to know the expected (budgeted) expense and compare it with the actual expense.
- **Budgeted Expense Calculation:**
\[
\text{Budgeted Expense} = (\text{Variable Cost per Patient-Visit} \times \text{Actual Patient-Visits}) + \text{Fixed Cost}
\]
\[
\text{Budgeted Expense} = ($2.80 \times 1,775) + $18,700 = $4,970 + $18,700 = $23,670
\]
- **Spending Variance Calculation:**
\[
\text{Spending Variance} = \text{Actual Expense} - \text{Budgeted Expense}
\]
\[
\text{Spending Variance} = $25,225 - $23,670 = $1,555
\]
The spending variance for administrative expenses for December was **$1,555**.
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