Question

3.) The performance report for Clouse Company showed the flexible budget for direct materials as $100,000 and actual direct materials as $86,000. This means there was a $14,000 unfavorable variance for the period. True or False

4.) Benny’s Bakery produces bagels for resale at local grocery stores. The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels). Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour. Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour. Last year's sales were expected to total 40,000 units. Benny just received last year's actual results showing sales of 35,000 units. What amount would the flexible budget show for direct materials?
A. $1,000,000
B. $350,000
C. $140,000
D. $875,000

Answer 1

Part 3)

The correct answer is False

Explanation

Direct material variance = actual cost- standard cost

= $ 86000 - $ 100000

= - $ 14000

= $ 14000 favourable

As in the given question, it has been given that it is unfavorable variance of $ 14000, where as actually it is favourable variance of $ 14000, so the correct answer is False

Part 4) the correct answer is

D) $ 875000

Explanation and calculation

Flexible budget for direct material for 35000 units

= standard qty per unit × rate per unit × no. Of units

= 2.5 × 10 × 35000

= $ 875000