At 9,000 direct labor hours, the flexible budget for indirect materials is $18,000. If $18,700 are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials:
A) $700 unfavorable.
B) $700 favorable.
C) $300 favorable.
D) $300 unfavorable.

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget rate for indirect materials:

Flexible budget rate = Total flexible budget / Total direct labor hours
Flexible budget rate = $18,000 / 9,000 hours
Flexible budget rate = $2 per direct labor hour

Next, we need to use the flexible budget rate to calculate the expected cost of indirect materials at 9,200 direct labor hours:

Expected cost of indirect materials = Flexible budget rate x Actual direct labor hours
Expected cost of indirect materials = $2 x 9,200 hours
Expected cost of indirect materials = $18,400

Finally, we can calculate the difference between the expected cost and the actual cost:

Difference = Actual cost - Expected cost
Difference = $18,700 - $18,400
Difference = $300 unfavorable

Therefore, the correct answer is D, $300 unfavorable.

At 9,000 Direct Labor Hours, the Flexible Budget for Indirect