Holy Smokes Company has the following information available: Budgeted cost of di

Question

Holy Smokes Company has the following information available:

Budgeted cost of direct materials at 1,000,000 units            $1,000,000

Budgeted cost of direct materials at 950,000 units                 $950,000

Actual cost of direct materials at 950,000 units                      $975,000

Actual level of output(units)                                                 950,000

Planned level of output(units)                                            1,000,000

The cost driver of product costs is units of output. What is the flexible budget variance for direct material costs?

A) $25,000 Unfavorable

B) $25,000 Favorable

C) $50,000 Favorable

D) $50,000 Unfavorable

Explanation / Answer

Flexible budget variance for direct material costs=975000-950000 = $25,000 Unfavorable Option A is correct

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