Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 15,000 containers using 25,000 pounds of direct materials at an average cost per pound of $64 and 12,000 direct manufacturing labor-hours at an average wage of $21.56 per hour.
June's direct material flexible-budget variance is ________.
A) $60,000 unfavorable
B) $100,000 favorable
C) $880,000 unfavorable
D) $18,720 favorable

Question

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 15,000 containers using 25,000 pounds of direct materials at an average cost per pound of $64 and 12,000 direct manufacturing labor-hours at an average wage of $21.56 per hour.
June's direct material flexible-budget variance is ________.
A) $60,000 unfavorable 
B) $100,000 favorable 
C) $880,000 unfavorable 
D) $18,720 favorable

Quizplus · Accepted Answer

Flexible-budget variance = (25,000 × $64) - (15,000 × 0.80 × $60) = $880,000 U