Mary's Fine Fashions Mary's Fine Fashions manufactures and sells various types of women's clothing. At the end of 2011, 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 rate of $1.25 per yard and 12 minutes of direct labor time at a standard rate of $.20 per minute. During 2012, 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 labor cost of $63,250 (253,000 minutes at $.25 per minute). Each shirt sells for $20.
Refer to the Mary's Fine Fashions information above. 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. The flexible budget for 23,000 shirts would include direct materials (23,000 shirts * 2.5 yards/shirt * $1.25/yd = $71,875) and direct labor (23,000 shirts * 12 minutes/shirt * $0.20/minute = $55,200). The total flexible budget cost for direct materials and labor is $71,875 + $55,200 = $127,075. The actual cost was $77,142 (materials) + $63,250 (labor) = $140,392. The flexible budget variance is $140,392 (actual) - $127,075 (flexible budget) = $13,317 unfavorable (U), because the actual costs were higher than the flexed budget.

Mary's Fine Fashions Mary's Fine Fashions Manufactures and Sells Various