Question

At 9,000 direct labor hours, the flexible budget for indirect materials is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials_______.

Answer 1

For indirect materials, the flexible budget report should show an unfavorable variance of $400 since actual costs ($28,000) exceeded the flexible budgeted costs ($27,600) at 9,200 direct labor hours.

Step-by-step explanation:

The question pertains to the calculation of a variance in a flexible budget report for indirect materials. When actual hours worked (9,200) exceed the hours in the flexible budget (9,000), we need to adjust the budget to reflect what the indirect materials cost should have been at that level of activity. The flexible budget for indirect materials was $27,000 at 9,000 hours, which gives us a rate of $3 per hour ($27,000 / 9,000 hours). At 9,200 hours, the adjusted flexible budget for indirect materials would be 9,200 hours x $3 per hour = $27,600. With the actual cost being $28,000, the variance is $28,000 - $27,600 = $400 unfavorable, because the actual cost exceeded the flexible budget amount.

Answer 2

Variance will be $400

Step-by-step explanation:

We have given number of labor hour = 9000

Budget for indirect material = $27000

Indirect material cost
`=(27000)/(9000)=3\ per\ direct\ labor\ hour`

We have given that there are 9200 direct labor hours

So budgeted cost = 9200×3 = $27600

We have given indirect material cost = $28000

So variance = $28000-$27600 = $400