Gladstone Footwear Corporation's flexible budget cost formula for supplies, a variable cost, is $2.83 per unit of output. The company's flexible budget performance report for last month showed a $9,555 unfavorable spending variance for supplies. During that month, 19,500 units were produced. Budgeted activity for the month had been 19,300 units. The actual cost per unit for indirect materials must have been closest to:

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget for supplies based on the actual activity level:

Flexible budget for supplies = Cost per unit of output x Actual units produced 
Flexible budget for supplies = $2.83 x 19,500 = $55,185

Next, we need to compare the flexible budget for supplies with the actual cost of supplies incurred:

Actual cost of supplies = Flexible budget for supplies + Unfavorable spending variance 
Actual cost of supplies = $55,185 + $9,555 = $64,740

Finally, we can calculate the actual cost per unit of output:

Actual cost per unit of output = Actual cost of supplies / Actual units produced 
Actual cost per unit of output = $64,740 / 19,500 = $3.32 (rounded to the nearest cent)

Therefore, the closest answer choice is A) $3.32.

Gladstone Footwear Corporation's Flexible Budget Cost Formula for Supplies, a Variable