Question

Animent Industries , Inc. (AII), developed standard costs for direct material and direct labor. In 2015, AII estimated the following standard costs for one of their major products, the 10 gallon plastic container.

Budgeted quantity

Budgeted price

Direct materials

010 pounds

$60 per pound

Direct labor

0.05 hours

$30 per pound

During June, AII produced and sold 20,000 containers using 1,900 pounds of direct materials at an average cost per pound of $64 and 1,000 direct manufacturing labor-hours at an average wage of $30.50 per hour.

1.) June’s direct material flexible-budget variance is __________.

a.) $7,200 unfavorable

b.) $600 favorable

c.) $1,600 unfavorable

d.) $500 favorable

Answer 1

Option (c) is correct.

Step-by-step explanation:

Given that,

Direct materials used = 1,900 pounds

Average cost per pound of direct material = $64

Number of Containers sold = 20,000

Direct material budgeted quantity = 0.10

Direct material budgeted price = $60

June’s direct material flexible-budget variance:

= (Pounds of direct materials used × Average cost per pound) - (Number of Containers sold × Direct material budgeted quantity × Direct material budgeted price per pound)

= (1,900 × $64) - (20,000 × 0.10 × $60)

= $121,600 - $120,000

= $1,600 unfavorable