Question

Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below:

Budgeted number of patient-visits		9,500
Budgeted variable overhead costs:
Supplies (@$5.20 per patient-visit)	$	49,400
Laundry (@$8.20 per patient-visit)		77,900
Total variable overhead cost		127,300
Budgeted fixed overhead costs:
Wages and salaries		52,900
Occupancy costs		85,800
Total fixed overhead cost		138,700
Total budgeted overhead cost	$	266,000

The total overhead cost at an activity level of 10,200 patient-visits per month should be:

Multiple Choice

• $276,220

• $285,600

• $266,000

• $275,380

Teel Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $4,350 per month plus $409 per press run plus $959 per book set-up. The company expected its activity in July to be 213 press runs and 120 book set-ups, but the actual activity was 210 press runs and 119 book set-ups. The actual cost for wages and salaries in July was $204,580.

The spending variance for wages and salaries in July would be closest to:

Multiple Choice

• $219 F

• $1,967 U

• $219 U

• $1,967 F

Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 4,700 tenant-days, but its actual level of activity was 4,650 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		-		$	35.90
Wages and salaries	$	4,200		$	9.70
Food and supplies		2,400			14.90
Facility expenses		10,200			6.40
Administrative expenses		8,200			0.50
Total expenses	$	25,000		$	31.50

Actual results for December:

Revenue	$	166,025
Wages and salaries	$	49,590
Food and supplies	$	70,555
Facility expenses	$	40,160
Administrative expenses	$	9,760

The activity variance for administrative expenses in December would be closest to:

Multiple Choice

• $25 F

• $25 U

• $790 F

• $790 U

Answer 1

1) Total overhead cost on 10200 visit = (127300/9500*10200)+138700 = 275380

So answer is d) $275380

2) Spending variance for wages and salaries = (4350+210*409+959*119)-204580 = 219 U

So answer is c) $219 U

3) Activity variance for administrative expense = (4700-4650)*.50 = 25 F

So answer is a) $25 F