Questions 1 and 2 refer to the following information The following information i

Question

Questions 1 and 2 refer to the following information

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

Budgeted labor hours per unit of product 2

Budgeted hourly wage rate $12.00

Budgeted production 5,780 units

Actual labor hours per unit of product 1.7

Actual hourly wage rate $12.40

Actual production 5,410 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

Answer:-1)- Direct labor static budget for 2016= Budgeted production*Budgeted labor hours per unit*Budgeted hourly wage rate

=(5780 units*2 labor hours per unit)*$12.00 per hour

=11560 hours*$12.00 per hour

=$138720

2)-Direct material flexible budget variance for 2016:-

              = Standard cost of direct labor – Actual cost of direct labor

              = $129840 - $114043 = $15797 Favourable

Where:-

Standard cost of direct labor= Actual production*Budgeted labor hours per unit*Budgeted hourly wage rate

=(5410 units*2 labor hours per unit)*$12.00 per hour

=10820 hours*$12.00 per hour

=$129840

Actual cost of direct labor= Actual production*Actual labor hours per unit*Actual hourly wage rate

=(5410 units*1.7 labor hours per unit)*$12.40 per hour

= 9197 hours*$12.40 per hour

=$114043

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