Question

A manufacturer planned to use $94 of materials per unit produced, but in the most recent period it actually used $92 of material per unit produced. During this same period, the company planned to produce 2,520 units, but actually produced only 2,200 units. The flexible-budget variance for materials, to the nearest dollar, is:

Multiple Choice

• $4,400 favorable.
• Impossible to determine without additional information.
• $25,040 unfavorable.
• $30,080 unfavorable.
• $5,040 unfavorable.

Answer 1

The flexible-budget variance for materials

Actual Cost of materials produced = Number of units produced x Actual rate per unit

= 2,200 units x $92.00 per unit

= $202,400

Total cost of materials under flexible budget = Number of units produced x Budgeted rate per unit

= 2,200 units x $98.00 per unit

= $206,800

Therefore, the flexible-budget variance for materials = Actual Cost of materials produced - Total cost of materials under flexible budget

= $202,400 - $206,800

= -$4,400

= $4,400 Favorable [Since the variance is negative $4,400]

“Hence, the flexible-budget variance for materials will be $4,400 favorable.”