Question

The Valenti Company uses flexible budgeting for cost control. Valenti produced 10,800 units of product during October, incurring indirect material costs of $13,000. Its master budget reflected indirect material costs of $180,000 at a production volume of 144,000 units. What was the flexible budget variance for the indirect material costs in October?

Answer 1

Answer:

$500 favorable

Explanation:

Given;

Number of units produced  = 10,800 units

Actual indirect material costs = $13,000

Reflected indirect material costs for 144,000 units  = $180,000

Now,

Per unit reflected indirect material costs = $180,000 ÷ 144,000

= $1.25 per unit

Therefore,

Budgeted indirect material cost for actual units produced

= $1.25 × 10,800

= $13,500

since,

the budgeted cost for indirect material cost for actual units produced is more than the actual indirect material cost, therefore

the indirect material costs in October is favorable

amount = Budgeted cost - Actual cost

= $13,500 - $13,000 = $500 favorable