How is direct labor hours from the original budget converted to direct labor hours in the flexed budget? I specifically don't get how 1.100hrs is calculated in the flexed budget.
Homework Answers
Answer
- Flexible Budget is prepared on the basis of ‘ACTUAL’ units produced and sold.
- Budgeted unit = 1.000 units
- Actual units = 1.100 units
- Standard hours per unit = 2 hours
- Hence, direct labor hours from original budget is converted to
direct labor hours in the flexed budget as:
Original budget direct labor hours = 1.000 units x 2 hour = 2 hours
Flexed budget direct labor hour = 1.100 units x 2 hours = 2.2 hours - Original budget direct labor cost = 2 hours x 5.5 OR 1.000 units x 11 = 11.000
- Flexed budget direct labor cost = 1.100 unit x 11 = 12.100
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