Lartey Corporations cost formula for its selling and ad

Lartey Corporation\’s cost formula for its selling and administrative expense is $22,200 per month plus $27 per unit. For the month of December, the company planned for activity of 5,300 units, but the actual level of activity was 5,270 units. The actual selling and administrative expense for the month was $168,150.

The spending variance for selling and administrative expense in December would be closest to:

$3,660 F
$3,660 U
$2,850 F
$2,850 U

Solution

The spending variancefor selling and adminstrative expenses will be as follows:

Step 1: Calculation of budgeted overheads= Selling and admistrative expenses+ (Number of unitsxcost per unit) which will be calculated as follows: $22200+(27x $5300)= $ 165300.

Step 2: Calculation of bugeted overhead rate= Budgeted overhead cost/ Number of units i.e $165300/53███= $████████

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