Question

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

Budgeted quantity

Budgeted price

Direct materials

0.80 pounds

$60 per pound

Direct labor

0.10 hours

$20 per hour

During June, Heavy Products produced and sold 15,000 containers using 25,000 pounds of direct materials at an average cost per pound of $64 and 12,000 direct manufacturing labor-hours at an average wage of $21.56 per hour.

June's direct material flexible-budget variance is ________.

Group of answer choices

$60,000 unfavorable

$100,000 favorable

$880,000 unfavorable

$18,720 favorable

Answer 1

Answer: $880,000 unfavorable

Calculation:

Direct material flexible budget variance = Standard cost - Actual cost

Standard quantity for actual output = 15,000 containers * 0.80 pounds = 12,000 pounds

Standard material cost per pound = $60

Standard cost = 12,000 pounds * $60 per pound = $720,000

Actual cost = 25,000 pounds * $64 per pound = $1,600,000

Direct material flexible budget variance = $720,000 - $1,600,000 = $880,000 Unfavorable

All the best...