Question

18. The spending variance measures

a. the difference between expected expenditures for the actual number of outputs and the expected expenditures for the planning budgeted number of outputs

b. the difference between expected expenditures for the actual number of outputs and the actual expenditures for the actual number of outputs.

c. the difference between budgeted expenditures and actual expenditures for the planned number of outputs.

d. what the costs and revenues should have been for the budgeted number of outputs.

e. what the costs and revenues should have been for the static planning budgeted number of outputs.

Answer 1

Option b i.e. the difference between expected expenditures for the actual number of outputs and the actual expenditures for the actual number of outputs is the correct answer.

Explanations:

The spending variance is also known as the rate variance refers to the difference between the expected expenditures and actual expenditure for the acctual number of output or quantity produced.

Option a is incorrect as expected instead of expenditures for the planning budgeted number of outputs in the given option there should have been expenditures for the actual number of outputs.

Option c is incorrect as this variance is based on the actual number of output rather than planned number of outputs.

Option d and option e are incorrect as they talk about the budgeted number of outputs and static planning budgeted number of outputs which should have been the actual number of utput and flexible budgeted number of outputs.