Ershey\'s Chocolates produces milk chocolate candy bars. The company currently u

Question

Ershey's Chocolates produces milk chocolate candy bars. The company currently uses a static budget process. The company's controller prepared the following budget for October's production:

Estimated production: 50,000 bars

Direct labor per bar: 3 minutes

Direct labor required for estimated production: 2,500 hours

Average direct labor rate per hour : $15.00

Estimated direct labor cost: $37,500

Actual production during October was 53,000 bars and actual direct labor cost was $39,000. Required: Prepare a flexible budget for Ershey's Chocolates that shows the projected direct labor cost. If an amount is zero, enter "0".

Flexible Budget Actual Difference

Estimated production

Direct labor per box

Direct labor hours needed

Direct labor cost per hour

Projected direct labor cost

What is the difference between the flexible budget and the actual labor costs?

Were the company's labor costs over or under budget for the month?

Explanation / Answer

Difference between Actual and flexible = $ 750

The company labor cost   under budget     since the budgeted cost is less than actual cost .

Flexible Actual Difference Estimated production 53000 53000 0 Direct labor per box 3 Direct labor hours needed 159000 minutes Direct labor cost per hour 15 Projected direct labor cost 39750     [159000*15/60] 39000 750

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