ANSWER: Flexible budget variance for DM: 9,600 U Flexible budget variance for DL

Question

ANSWER:
Flexible budget variance for DM: 9,600 U

Flexible budget variance for DL: 3,600 U

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8-27 Basic Flexible Budget The budgeted prices for materials and direct labor per unit of finished product are $13 and $5, respectively. The production manager is delighted about the following data: Variance $6.000F 2,400F Master Actual Direct materials Direct labor $104.000 $98.000 37,600 40,000 1. Prepare a report that might provide a more detailed explanation of why the static (master) budget was not achieved. Good output was 6,800 units.

Explanation / Answer

Cost Particulars Per Unit Master Budget Units Direct Material 13.00 104000 8000 Direct Labor 5.00 40000 8000 Actual Production 6800 Report on Variance Cost Particulars Master Budget Flexible Budget Actual Output Variance U/F Units 8000 6800 6800 Direct Material 104000 88400 98000 -9600 Unfavourable Direct Labor 40000 34000 37600 -3600 Unfavourable Total 144000 122400 135600 -13200 Unfavourable *Variance=Flexible Budget-Actual Output

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