Question

Eastern Seams is a local casual clothing shop that makes a variety of t-shirt styles. Below...

Eastern Seams is a local casual clothing shop that makes a variety of t-shirt styles. Below is some actual vs. budget information for Eastern's t-shirts for the month of May. Assume no beginning/ending inventories for simplicity. The cost-allocation base for both variable and fixed overhead is direct labor-hours.

Data for the Month of May
Static
Actual Budget
# T-shirts made and sold 5,200 5,350
Selling price per t-shirt $18 $17
Yards of fabric per t-shirt 1.1 1
Cost per yard of fabric $2.81 $2.66
Time in hours to sew one t-shirt 0.25 0.2
Cost of direct labor (per hour) $14 $15
Variable overhead costs $3,600 $3,000
(utilities, sewing machine maintenance, etc.)
Fixed overhead costs $4,700 $4,800
(store rent, insurance, etc.)

What is the flexible budget variance for direct materials?

a.

$2,241.20 U
b.

$1,842.20 U
c.

$2,241.20 F
d.

$1,842.20 F
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Homework Answers

Answer #1
Correct Option A i.e. $2241.20 U
Actual Flexible Static
No. of units 5200 5200 5350
Yards of fabric per t-shirt 1.1 1 1
Cost per yard of fabric 2.81 2.66 2.66
Material cost per unit 3.091 2.66 2.66
Total material cost 16073.2 13832 14231
flexible budget variance for direct materials = Direct material flexible cost - actual dm cost
   =13832 - 16073.2
2241.2 U
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