Question

At Jacobson Company, indirect labor is a variable cost that varies with direct labor-hours. Last month’s performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 Favorable. If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour):

Answer 1

Flexible budget cost formula for indirect labor is $0.25 per DL hours

Step-by-step explanation:

Flexible budget cost for indirect labor = Actual indirect labor cost + Associated spending variance

= $5,780 + $245

= $6,025

Flexible budget cost formula for indirect labor= Flexible budget cost for indirect labor / Direct labor-hours

= $6,025 / 24,100 DL hours

= $0.25 per DL hours