Question

Milton  Company uses a standard cost system.  

-Standards call for 2 direct labor hours per widget.  The standard labor rate is $10 per hour.

-Four pounds of material are needed for each widget at a standard cost of $2.25 per pound.  

Milton based the static budget for the year on 15,000 widgets.  Milton actually produces 17,000 widgets during the year.

-Direct labor costs are $359,100 for 34,200 hours.

- Milton purchased and used 70,000 pounds of materials at $2.50 per pound.

1. For direct labor, what is the volume variance?

2. For direct labor, what is the flex budget variance?

3. For materials, what is the flex budget variance?

Answer 1

1)	Direct labor volume variance
	(Actual hrs - standard hrs allowed)*standard rate
	(34,200      - 17000*2)*10
	2000	U
2)	direct labor Flex budget variance
	(Actual - Standard cost for actual units)
	(359,100   - 17000*2*10)
	19100	U
3)	Direct material Flex budget variance
	70000*2.5           - 17000*4*2.25
	22000	U