Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of C
ID: 2542016 • Letter: V
Question
Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of Chemical Y in fiscal year 2006. It actually produced 11,000 gallons. The production process for Chemical Y has two principal ingredients, Mystery Material M and labor. To produce 1 gallon of Chemical Y under budget requires 10 gallons of Mystery Material M @ $3/gallon and .5 labor hours @$20/labor hour. During 2006, it spent $346,500 to purchase 99,000 gallons of Mystery Material M that Variance Company used in production. Its actual total labor costs were $115,000 and it used 5,000 hours of labor.
1. What is the static budget labor variance?
A) $15,000
B) $10,000
C) $5,000
D) $500
2. What is the flexible budget labor variance?
A) $15,000
B) $10,000
C) $5,000
D) $500
*bolded is correct answer, please explain why *
Explanation / Answer
Static budget labour variance = Static budget labour-actual labour
= (10000*.50*20-115000)
Static budget labor variance = 15000
Flexible budget labour variance = Flexible budget labour-actual labour
= (11000*.50*20-115000)
Flexible budget labor variance = 5000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.