Sheldon Company manufactures only one product and uses a standard cost system.During the past month,the manufacturing operations had the following variances: Direct labor rate variance = $30,000 Favorable.Direct labor efficiency variance = $50,000 Unfavorable.Sheldon allows 5 standard direct labor hours per unit produced,and its standard direct labor hourly rate is $50.During the month,the company used 25 percent more direct labor hours than the standard allowed.What was the direct labor flexible-budget (FB)variance for the month?
A)$20,000 unfavorable.
B)$25,000 unfavorable.
C)$37,500 favorable.
D)$62,500 unfavorable.
E)$80,000 unfavorable.

Question

Quizplus · Accepted Answer

The direct labor flexible-budget (FB) variance is the difference between the actual direct labor cost and the flexible-budget direct labor cost. The flexible-budget direct labor cost is the standard direct labor cost adjusted for the actual level of production. In this case, the actual level of production was 25% more than the standard allowed, so the flexible-budget direct labor cost is:Flexible-budget direct labor cost = Standard direct labor cost + (Actual direct labor hours - Standard direct labor hours) x Standard direct labor hourly rateFlexible-budget direct labor cost = (5 hours per unit x $50 per hour) + (25% x 5 hours per unit x $50 per hour)Flexible-budget direct labor cost = $250 per unit + $62.50 per unitFlexible-budget direct labor cost = $312.50 per unitThe actual direct labor cost is the sum of the direct labor rate variance and the direct labor efficiency variance:Actual direct labor cost = Direct labor rate variance + Direct labor efficiency varianceActual direct labor cost = $30,000 favorable + $50,000 unfavorableActual direct labor cost = $20,000 unfavorableThe direct labor flexible-budget (FB) variance is the difference between the actual direct labor cost and the flexible-budget direct labor cost:Direct labor flexible-budget (FB) variance = Actual direct labor cost - Flexible-budget direct labor costDirect labor flexible-budget (FB) variance = $20,000 unfavorable - $312.50 per unitDirect labor flexible-budget (FB) variance = $20,000 unfavorable

Sheldon Company Manufactures Only One Product and Uses a Standard