Margaret Duffy Company has the following information available:
$\begin{array} { l }
\text {Budgeted cost of direct materials at 900,000 units }&\$900,000 \
\text {Budgeted cost of direct materials at 820,000 units }&\$820,000 \
\text {Actual cost of direct materials at 820,000 units }&\$840,000 \
\text {Actual level of output(units) }&820,000 \
\text {Planned level of output(units) }& 900,000\
\end{array}$

The cost driver of product costs is units of output.What is the flexible budget variance for direct material costs?
A) $20,000 Unfavorable
B) $20,000 Favorable
C) $60,000 Favorable
D) $60,000 Unfavorable

Question

Margaret Duffy Company has the following information available:
$\begin{array} { l  }
 \text {Budgeted cost of direct materials at 900,000 units }&\$900,000 \
 \text {Budgeted cost of direct materials at 820,000 units }&\$820,000 \
 \text {Actual cost of direct materials at 820,000 units }&\$840,000 \
 \text {Actual level of output(units) }&820,000 \
 \text {Planned level of output(units) }& 900,000\
\end{array}$

The cost driver of product costs is units of output.What is the flexible budget variance for direct material costs?
A) $20,000 Unfavorable
B) $20,000 Favorable
C) $60,000 Favorable
D) $60,000 Unfavorable

Quizplus · Accepted Answer

The flexible budget variance for direct material costs is calculated by comparing the actual costs to the budgeted costs at the actual level of output. The budgeted cost of direct materials at 820,000 units is $820,000, and the actual cost at the same level of output is $840,000. Therefore, the variance is $840,000 - $820,000 = $20,000 Unfavorable, because the actual costs exceeded the budgeted costs.

Margaret Duffy Company Has the Following Information Available The Cost Driver of Product Costs Is Units of Output