Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used. The static budget for the month of March showed an estimated production of 15,000 boxes in March. During March, 17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $.40 per pound were purchased and used. What should be the total direct materials cost according to Violetta's flexible budget for March?
A) $20,400
B) $26,520
C) $18,000
D) $23,400

Question

Quizplus · Accepted Answer

The flexible budget adjusts for the actual level of production. For 17,000 boxes, the standard cost is $1.20 per box (4 pounds x $0.30). Therefore, the total direct materials cost is 17,000 boxes x $1.20 = $20,400.