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 $8,142 favorable. During that month, the company worked 17,700 machine-hours. Budgeted activity for the month had been 18,200 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to ($):a. 1.23b. 1.26c. 2.12d. 2.18

Answer 1

Answer:

(d) $2.18

Cost formula per machine hour for indirect material cost = $2.18

Explanation:

Actual Indirect material cost = $30,444

Actual hours = 17,700

Standard hours = 18,200

Spending variance for indirect material = $8,142

That is favorable,

Formula of spending variance = (Standard Price - Actual Price) $\times$ Actual Quantity

= Standard Price $\times$ Actual Quantity - Actual Price $\times$  Actual Quantity = 1,842

Standard Price $\times$ Actual Quantity = $8,142 + $30,444 = $38,586

Standard Price = $38,586/17,700 = $2.18

Final Answer

Cost formula per machine hour for indirect material cost = $2.18