Mary’s Fine Fashions
US company Mary’s Fine Fashions manufactures and sells various types of women’s clothing. At the end of 2008, Mary had estimated for the production and sale of 25 000 short-sleeve shirts. Each shirt has a standard calling for 2.5 yards of direct material at a standard cost of $1.25 per yard and 12 minutes of direct labour time at a standard cost of $.20 per minute. During 2009, the company actually produced and sold 23 000 shirts. These 23 000 shirts had an actual direct materials cost of $77 142 (59 340 yards at $1.30 per yard) and an actual direct labour cost of $63 250 (253 000 minutes at $.25 per minute). Each shirt sells for $20.
-What is Mary's flexible budget variance?
A) $14 475 F
B) $28 950 U
C) $42 267 F
D) $13 317 U

Question

Quizplus · Accepted Answer

The flexible budget variance is calculated by comparing the actual results to what the budget would have been if it had been adjusted (flexed) for the actual level of activity. First, calculate the flexible budget for 23,000 shirts: Direct materials: 23,000 shirts * 2.5 yards/shirt * $1.25/yard = $71,875 Direct labor: 23,000 shirts * 12 minutes/shirt * $0.20/minute = $55,200 Total flexible budget cost = $71,875 + $55,200 = $127,075 Actual total cost = $77,142 (materials) + $63,250 (labor) = $140,392 Flexible budget variance = Actual cost - Flexible budget cost = $140,392 - $127,075 = $13,317 Unfavorable (U), because actual costs were higher than the flexible budget.

Mary’s Fine Fashions US Company Mary’s Fine Fashions Manufactures and Sells Various Types