Question

during april, the company produced 4,680 units and incurred indirect labor costs of $14,600. what amount would be reported in april as a flexible-budget variance for indirect labor? is this variance favorable (f) or unfavorable (u)?

Answer 1

The flexible budget variance for indirect labor in April would be $280 unfavorable (U).

The flexible budget is a budget that is adjusted to reflect the actual level of activity. In this case, the actual level of activity was 4,680 units. The budgeted indirect labor cost for 4,680 units is $14,880 ($3.20 per unit). The actual indirect labor cost of $14,600 is $280 less than the budgeted cost, so the flexible budget variance is $280 unfavorable.

Here is the calculation of the flexible budget variance for indirect labor:

Budgeted indirect labor cost for 4,680 units = $3.20 per unit * 4,680 units = $14,880

Actual indirect labor cost = $14,600

Flexible budget variance = $14,880 - $14,600 = $280 unfavorable