Camden Products Inc. manufacturers travel accessories. The company's controller has prepared the following static budget of one of the product lines for the month of November: Actual production during November was 1,300 units and actual direct labor cost was $2,520.
If Camden prepares a flexible budget for November, the projected direct labor cost would be:

Question

Camden Products Inc. manufacturers travel accessories. The company's controller has prepared the following static budget of one of the product lines for the month of November:  Actual production during November was 1,300 units and actual direct labor cost was $2,520.
If Camden prepares a flexible budget for November, the projected direct labor cost would be:

Quizplus · Accepted Answer

To calculate the flexible budget for direct labor cost, we need to use the budgeted direct labor cost per unit and multiply it by the actual number of units produced.

Budgeted direct labor cost per unit = $1,500 ÷ 1,500 units = $1 per unit

Flexible budget for direct labor cost = Actual units produced × Budgeted direct labor cost per unit
Flexible budget for direct labor cost = 1,300 units × $1 per unit
Flexible budget for direct labor cost = $1,300

Therefore, the projected direct labor cost for November according to the flexible budget is $1,300. However, the closest option is C, $2,340. This means that the company has spent more on direct labor than what was budgeted, indicating that there may be some inefficiencies in the production process.