Example of activity and spending variances adnams

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Example of Activity and Spending VariancesAdnams Beer Inc uses hops as a raw material and it is a variable cost, budgeted at $10.90 per barrel. Last month, 19000 barrels were manufactured compared to 20000 budgeted activity. Costs were $209,000 for hopsA.What is the activity variance for hops?B.What is the spending variance for hops?
Quick Check Newsom Footwear Corporation's flexible budget cost formula for supplies, a variable cost, is $2.61 per unit of output. The company's flexible budget performance report for last month showed a $6,840 unfavorable spending variance for supplies. During that month, 17,100 units were produced. Budgeted activity for the month had been 16,700 units. The actual cost per unit for indirect materials must have been closest to:
Lecture 13 AgendaChapter 9: Flexible BudgetsChapter 4B: Homework HintsNext Topics
Possible methodsDirect Method E4B-4Only recognize use of support departments by operating departments ignore support department use by other support departmentsStep down method E4B-3Recognize support dept use of other support depts based on a “pecking order”Can enhance accuracy of cost allocation by capturing the effect of indirect relationships between departments
Direct Method (E4B-4)Take the support department costIgnore the resource used by non-operating departmentsCalculate the relative use by operating departments onlyAllocate the support department cost using this relative useThe operating departments effectively “pay” for inter support dept (reciprocal) usage
Example of Direct MethodAndrews Inc has 2 operating and 2 service deptsService DepartmentAllocation BaseCafeteriaNumber of employeesCustodialSquare feet occupied
Direct Method An Example

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