The following information is for direct material cost for X Company for 2016: Bu
ID: 2598185 • Letter: T
Question
The following information is for direct material cost for X Company for 2016: Budgeted pounds per unit of product Budgeted cost per pound Budgeted production Actual pounds per unit of product Actual cost per pound Actual production 2.8 $13.50 5,210 units 2.7 $13.80 4,280 units 1. What was the direct material static budget for 2016? Submit Answer Tries 0/2 2. What was the direct material flexible budget variance for 2016 (a positive number means a favorable variance; a negative number means an unfavorable variance)? Submit Answer Tries o/2Explanation / Answer
Answer 1
Note : Static budget is also called as master budget & it does not change with actual level of activity
Direct Material static budget for 2016 = 5,210 units * 2.8 pounds per unit * $13.50 = $196,938
Answer 2
Note : Direct material flexible budget variance = Actual cost - Flexible budgeted direct material cost
where ,
Flexible budgeted direct material cost = Actual quantity of Direct material used * Budgeted rate
=4,280 units * 2.7 pounds per unit * $13.50 = $156,006
Actual cost = 4,280 units * 2.7 pounds per unit * $13.80 = $159,472.80
Direct material flexible budget variance for 2016 = $159,472.80 - $156,006 = - $3,466.80 or - $3,467
Explanation : Since the actual cost exceeds the flexible budgeted cost thus the resultant Direct material flexible budget variance is unfavorable therefore the amout is denoted by a negative sign.
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