A company manufacturers a unique product. The company\'s controller has prepared

Question

A company manufacturers a unique product. The company's controller has prepared the following static budget for the month of February:

300 units

1 hour

300 hours

$     10

$3,000

Actual production during February was 275 units and actual direct labor cost was $2,900.

If the company prepares a flexible budget for February, direct labor cost is estimated to be:

A. $2,750

B. $2,900

C. $3,000

D. $3,165

Estimated production

300 units

Direct labor per unit

1 hour

Direct labor required for estimated production

300 hours

Average direct labor rate per hour

$     10

Estimated direct labor cost

$3,000

Explanation / Answer

Direct labor cost = Direct labor reqired for estimated production x Average direct labour rate per hour

Direct labor cost = 300 x 10 =$3000

the correct answer is C

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