Yugo Company produces 2,500 units.Each unit was expected to require 2 labor hours at a cost of $10 per hour.Total labor cost was $52,250 for 4,750 hours worked.Direct labor is measured in labor hours.What is the flexible budget variance for direct labor?
A)$2,250 Favorable
B)$2,250 Unfavorable
C)$7,500 Favorable
D)$7,500 Unfavorable

Question

Quizplus · Accepted Answer

The flexible budget is calculated as 2,500 units x 2 labor hours x $10 per hour = $50,000. 
The actual labor cost is $52,250. 
The budgeted cost per unit is $20 (2 labor hours x $10 per hour). 
The actual cost per unit is $20.9 ($52,250/2,500 units). 
The difference between the actual cost and the flexible budget is $2,250 unfavorable.

Yugo Company Produces 2,500 Units