Question

3.Tractor Corporation produces toy tractors. What is the combined total of the flexible budget variances?

The company uses the following direct cost categories:

Category

Standard Inputs

for 1 output

Std. Cost

per input

Direct Materials

4.00

$12.50

Direct Labour

1.40

9.50

Direct Marketing

0.54

5.50

Actual performance for the company is shown below:

Actual output: 5,000 units

Direct Materials:

Materials costs

$299,000

Input purchased and used

23,000

Actual price per input

$13.00

Direct Manufacturing Labour:

Labour costs

$95,000

Labour-hours of input

9,500

Actual price per hour

$10.00

Direct Marketing Labour:

Labour costs

$40,000

Labour-hours of input

5,000

Actual price per hour

$8.00

Select one:

a. $78,500 unfavourable

b. $77,500 unfavourable

c. $99,000 unfavourable

d. $102,650 unfavourable

Answer 1

Correct Answer (D) $102650 Unfavorable Actual DATA for		5000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	23000	$            13.00	$        299,000.00
Direct labor	9500	$          10.000	$           95,000.00
Variable Overhead	5000	$               8.00	$           40,000.00
Total Actual Cost			$        434,000.00

Standard DATA for		5000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	20000	$            12.50	$        250,000.00
Direct labor	7000	$               9.50	$           66,500.00
Variable Overhead	2700	$               5.50	$           14,850.00
Total Standard Cost			$        331,350.00

Total Standard Cost	$        331,350.00
Total Actual Cost	$        434,000.00
Flexible Budget variance	$      (102,650.00) Unfavorable

Variance is unfavorable since actual cost is more than standard cost.