Asked by Jennifer Forest on May 07, 2024
Verified
At Jacobson Company, indirect labor is a variable cost that varies with direct labor-hours.Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 F.If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) :
A) $0.20
B) $0.25
C) $0.30
D) $0.35
Indirect Labor
The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.
Direct Labor-Hours
The total hours worked by employees directly involved in the production process.
Spending Variance
This refers to the difference between the budgeted amount of spending and the actual amount spent.
- Analyze and explain discrepancies in budget implementation, involving spending, revenue, and operational income differences.
- Understand the relationship between output measures and cost formulation in budgeting.
Verified Answer
Since the spending variance is Favorable, the Flexible budget amount must be greater than the Actual results.$245 = Flexible budget - Actual results
$245 = Flexible budget - $5,780
Flexible budget = $6,025
Flexible budget = Variable cost per direct labor-hour × 24,100 direct labor-hours
$6,025 = Variable cost per direct labor-hour × 24,100 direct labor-hours
Variable cost per direct labor-hour = $6,025 ÷ 24,100 direct labor-hours = $0.25 per direct labor-hour
Learning Objectives
- Analyze and explain discrepancies in budget implementation, involving spending, revenue, and operational income differences.
- Understand the relationship between output measures and cost formulation in budgeting.
Related questions
Lightsey Natural Dying Corporation Measures Its Activity in Terms of ...
Ramkissoon Midwifery's Cost Formula for Its Wages and Salaries Is ...
Tos Corporation's Flexible Budget Cost Formula for Indirect Materials, a ...
Lenci Corporation Manufactures and Sells a Single Product ...
Dermody Snow Removal's Cost Formula for Its Vehicle Operating Cost ...