Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,110 patient-visits and the actual level of activity was 1,100 patient-visits. The cost formula for administrative expenses is $3.50 per patient-visit plus $19,500 per month. The actual administrative expense was $20,800. In the clinic’s flexible budget performance report for last month, the spending variance for administrative expenses was: A) $2,550 F B) $970 F C) $35 F D) $2,585 F<\/p>\n\n\n\n
The correct answer and explanation is:<\/strong><\/mark><\/p>\n\n\n\n Correct Answer: C) $35 F<\/strong><\/p>\n\n\n\n To find the spending variance<\/strong> for administrative expenses, we compare the actual administrative expense<\/strong> to the flexible budget administrative expense<\/strong> based on actual activity.<\/p>\n\n\n\n The cost formula for administrative expenses is:<\/p>\n\n\n\n The flexible budget<\/strong> adjusts for the actual level of activity. In this case, the actual number of patient-visits is 1,100<\/strong>. Flexible Budget=(1,100\u00d73.50)+19,500=3,850+19,500=23,350\\text{Flexible Budget} = (1,100 \\times 3.50) + 19,500 = 3,850 + 19,500 = 23,350<\/p>\n\n\n\n The actual administrative expense was $20,800<\/strong>. Spending Variance=Flexible Budget\u2212Actual Cost=23,350\u221220,800=2,550\\text{Spending Variance} = \\text{Flexible Budget} – \\text{Actual Cost} = 23,350 – 20,800 = 2,550<\/p>\n\n\n\n Because the actual expense is less<\/strong> than the flexible budget amount, this is a favorable (F)<\/strong> variance.<\/p>\n\n\n\n It seems we must compare budgeted cost for actual activity<\/strong> not to the static budget<\/strong> but to the actual result<\/strong>. Let’s verify using correct alignment:<\/p>\n\n\n\n Wait\u2014there\u2019s a mistake. Let’s reevaluate using correct interpretation.<\/p>\n\n\n\n Flexible budget at actual level (1,100 visits)<\/strong>: (1,100\u00d73.50)+19,500=3,850+19,500=23,350(1,100 \\times 3.50) + 19,500 = 3,850 + 19,500 = 23,350<\/p>\n\n\n\n But actual expense = $20,800<\/strong>, which is $2,550 less<\/strong>, making the variance $2,550 Favorable<\/strong>.<\/p>\n\n\n\n Hence, correct answer is<\/strong>: The earlier answer \u201cC) $35 F\u201d is incorrect<\/strong>.<\/p>\n\n\n\n Final validated correct answer is:<\/p>\n\n\n\n A) $2,550 F<\/strong><\/p>\n\n\n\n This variance is favorable because the actual cost is lower than the flexible budget estimate. It shows that the clinic spent $2,550 less on administrative expenses than expected for 1,100 visits. This might be due to cost control, underutilization of services, or timing of expense recognition.<\/p>\n","protected":false},"excerpt":{"rendered":" Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,110 patient-visits and the actual level of activity was 1,100 patient-visits. The cost formula for administrative expenses is $3.50 per patient-visit plus $19,500 per month. The actual administrative expense was $20,800. In the clinic’s flexible budget performance […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-30230","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/30230","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=30230"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/30230\/revisions"}],"predecessor-version":[{"id":30235,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/30230\/revisions\/30235"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=30230"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=30230"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=30230"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Explanation:<\/h3>\n\n\n\n
\n\n\n\nStep 1: Understand the cost formula<\/h4>\n\n\n\n
\n
\n\n\n\nStep 2: Apply the flexible budget formula<\/h4>\n\n\n\n
\n\n\n\nStep 3: Compare with actual cost<\/h4>\n\n\n\n
\n\n\n\nStep 4: Recheck: Why is $35 F correct?<\/h4>\n\n\n\n
More accurate calculation:<\/h3>\n\n\n\n
A) $2,550 F<\/strong><\/p>\n\n\n\n
\n\n\n\nCorrection:<\/h3>\n\n\n\n