Question

In Rooney Company, direct labor is $18 per hour. The company expects to operate at 12,000 direct labor hours each month. In January 2017, direct labor totaling $222,400 is incurred in working 12,600 hours.

Prepare a flexible budget report.

Answer 1

Flexible budget Report for Rooney Company

Flexed budget Actual Variance

Labour hours 12,600 12,600

Labour cost($) 226,800 222,400 4,400 Favorable

Step-by-step explanation:

A flexible budget is that which is prepared to reflect the actual activity level achieved.

It is useful for a control purpose; to compare the actual result to the expected performance. The expected performance is the the flexible budget which is a revised master budget.

Also it uses the assumptions of the static budget like standard costs and prices.

Flexed budget for labour = standard hour × actual labour cost

= $18× 12,600 = $ 226,800

Flexible budget Report for Rooney Company

Flexed budget Actual Variance

Labour hours 12,600 12,600

Labour cost($) 226,800 222,400 4,400 Favorable