Somson SuperKlean Services master budget includes $258,000 for equipment depreciation. The master budget was prepared for an
Question:
Somson SuperKlean Service’s master budget includes $258,000 for equipment depreciation. The master budget was prepared for an annual volume of 103,200 chargeable hours. This volume is expected to occur uniformly throughout the year. During September, Somson performed 8,170 chargeable hours, and the firm recorded $20,500 of depreciation expense.
Budgeted equipment depreciation | $ 258,000 | ||||||
Budgeted chargable hours | 103,200 | ||||||
Actual chargable hours in September | 8,170 | ||||||
Actual equipment depreciation | $ 20,500 |
Required
1. Determine the flexible-budget amount for equipment depreciation in September.
2. Compute the spending variance for the depreciation expense on equipment.
3. Calculate the production-volume variance for the depreciation expense. What is the interpretation of this variance?
4. List possible reasons for the spending variance.
Step by Step Answer:
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins