spending variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The company also established the following cost formulas for its
selling expenses:
Advertising
Sales salaries and commissions
Shipping expenses
Fixed Cost
per Month
$ 210,000
$ 120,000
99.00
Variable
Cost per
Unit Sold
Spending variance related to advertising
$ 13.00
$ 4.00
The planning budget for March was based on producing and selling
26,000 units. However, during March the company actually produced
and sold 31,000 units and incurred the following costs:
a. Purchased 155,000 pounds of raw materials at a cost of $7.20 per
pound. All of this material was used in production.
b. Direct-laborers worked 56,000 hours at a rate of $16.00 per hour.
c. Total variable manufacturing overhead for the month was
$524,720.
d. Total advertising, sales salaries and commissions, and shipping
expenses were $220,000, $460,000, and $125,000, respectively.
13. What is the spending variance related to advertising? (Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no
effect (i.e., zero variance.). Input the amount as a positive value.)
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