Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.

During July, GII produced and sold 4,000 containers using 1,350 pounds of direct materials at an average cost per pound of $48 and 2,450 direct manufacturing labor hours at an average wage of $12.25 per hour.
July's direct material flexible-budget variance is ________.
A) $4,800 unfavorable
B) $7,500 favorable
C) $9,900 unfavorable
D) $0

Question

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.

During July, GII produced and sold 4,000 containers using 1,350 pounds of direct materials at an average cost per pound of $48 and 2,450 direct manufacturing labor hours at an average wage of $12.25 per hour.
July's direct material flexible-budget variance is ________.
A) $4,800 unfavorable 
B) $7,500 favorable 
C) $9,900 unfavorable 
D) $0

Quizplus · Accepted Answer

Direct material flexible-budget variance = (1,350 × $48) - (4,000 × 0.30 × $50) = $4,800 U