At Rost Corporation, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $7,540 for the month and that the associated spending variance was $560 F. If 10,800 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) closest to:
A) $0.75
B) $0.80
C) $0.85
D) $0.65

Question

Quizplus · Accepted Answer

The flexible budget cost formula for indirect labor is:Indirect labor cost = $0.75 per direct labor-hourThis is because the actual indirect labor cost of $7,540 was incurred for 10,800 direct labor-hours, which means that the indirect labor cost per direct labor-hour was $7,540 / 10,800 = $0.75.

At Rost Corporation, Indirect Labor Is a Variable Cost That