The following information is for direct labor cost for X Company for 2016: Budge

Question

The following information is for direct labor cost for X Company for 2016:

Budgeted labor hours per unit of product 3.2

Budgeted hourly wage rate $13.70

Budgeted production 5,110 units

Actual labor hours per unit of product 2.8

Actual hourly wage rate $13.90

Actual production 4,290 units

1. What was the direct labor static budget for 2016?

2. What was the direct labor flexible budget variance for 2016 (a positive number means a favorable variance; a negative number means an unfavorable variance)?

Explanation / Answer

1. Static labour budget = (5110*3.2*13.70) = $224022.40

2. Flexible budget variance = (Flexible budget cost-actual cost)

= (4290*3.2*13.70)-(4290*2.8*13.90)

= $ 188073.60 - $ 166966.80

Flexible budget variance = favourable $ 21106.80

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