Question

Birkner Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable cost, was $30,444 and that the spending variance for indirect materials cost was $8,142 favorable. During that month, the company worked 17,700 machine-hours. Budgeted activity (i.e., planning budget activity) for the month had been 18,200 machine-hours. The budgeted cost formula per machine-hour for indirect materials cost must have been closest to:

Answer 1

Answer:

$2.18 per machine hour

Explanation:

The calculation of Indirect material cost is shown below:-

Flexible budget indirect material = variable cost + indirect materials cost

= $30,444 + $8,142

= $38,586

Cost per machine hour for indirect material = Flexible budget indirect material ÷ Company machine hours

= $38,586 ÷ $17,700

= $2.18 per machine hour