13 Flexible budget LO8 Coffs Harbour Pineapple Corp. produces pineapple sweets.

ID: 2341352 • Letter: 1

Question

13 Flexible budget LO8 Coffs Harbour Pineapple Corp. produces pineapple sweets. The company currently uses a static budget process. The company's controller prepared the following budget for April's production Estimated production Direct labour per box Direct labour required for estimated 24000 boxes 4 minutes 1600 hours production Average direct labour rate per hour Estimated direct labour cost $12.50 $20000 Actual production during April was 26400 boxes and actual direct labour cost was $22 850 Required Prepare a flexible budget for Coffs Harbour Pineapple Corp that shows the projected direct labour cost and any difference between the budget and actual labour cost.

Explanation / Answer

Actual production

26400 boxes

Direct labor per box

4 minutes

Direct labor hours required for actual production as per standard data (26400 boxes * 4 minutes/60)

1760

Average direct labor rate per hour

12.5

flexible labour cost (1760*12.50)

$ 22,000

Flexible volume variance is also known as sales activity variance

Actual result

Flexible budget variance (actual cost - flexible budget)

Flexible budget

Flexible volume variance (flexible budget - static budget)

Static budget

Units produced in boxes

26400

24000

direct labor cost

$ 22,850

$ 850

$ 22,000

$ 2,000

$ 20,000

Indicate

Unfavorable

Total static budget variance (actual cost - static budget)

$ 2,850

Unfavorable