Question

At 16000 direct labor hours, the flexible budget for indirect materials is $48000. If $50400 are incurred at 16400 direct labor hours, the flexible budget report should show the following difference for indirect materials: $2400 unfavorable. $1200 favorable. $2400 favorable. $1200 unfavorable.

Answer 1

Variance will be $1200

So option (d) will be correct option

Step-by-step explanation:

We have given direct labor hour = 16000

Budget for indirect material = $48000

So indirect material cost
`=(48000)/(16000)=3\ per\ direct\ labor\ hour`

Budgeted cost = 3×16400 = $49200

Actual cost = $50400

So variance = $50400 - $49200 = $1200 unfavorable ( As budgeted cost is less than actual cost )

So option (d) is correct answer