Question

At 9,000 direct labor hours, the flexible budget for indirect materials is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials:

Answer 1

Answer:

$400 not favorable

Explanation:

Flexible budget for indirect materials =$27000

Cost Incurred in direct labour hours= $28,000

Hours of labour= 9,200

DHL= Direct labour hour

The  indirect materials budgeted  per direct labor hour is= $3 ($27,000/9,000).

So the activity level of 9,200 direct labor hours, budgeted indirect materials are $27,600 (9,200 X $3 per DLH).

therefore, the actual indirect materials cost is= $400 ($28,000 - $27,600)  more than estimated. the difference is not favorable