Question

Badger Bakeries anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Badger $12, what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets?

Static Flexible

A. $15,200U $15,200U

B. $15,200U $28,400U

C. $28,400U $15,200U

D. $28,400U $28,400U

E. None of the above

Answer 1

The process-time variance can be calculated by subtracting the flexible budget hours multiplied by the standard cost per hour from the flexible budget hours multiplied by the actual cost per hour. In this case, the process-time variance would be $170,457.

Step-by-step explanation:

The process-time variance can be calculated by subtracting the flexible budget hours (actual hours worked) multiplied by the standard cost per hour (static budget cost per hour) from the flexible budget hours multiplied by the actual cost per hour. In this case, the flexible budget hours are 15,200 and the actual cost per hour is $12.

The standard cost per hour can be calculated by dividing the static budget cost by the static budget hours: $11,000/14,000 = $0.7857. Therefore, the process-time variance would be ($15,200 x $12) - ($15,200 x $0.7857) = $182,400 - $11,942.86 = $170,457.14 or $170,457.