Question

QUESTION 7 US company Mary's Fine Fashions manufactures and sells various types of women's clothing. At the end of 2008, Mary had estimated for the production and sale of 25 000 short-sleeve shirts. Each shirt has a standard calling for 2.5 yards of direct material at a standard cost of $1.30 per yard and 15 minutes of direct labour time at a standard cost of $.20 per minute. During 2009, the company actually produced and sold 23 000 shirts. These 23 000 shirts had an actual direct materials cost of $77 142 (59 340 yards at $1.30 per yard) and an actual direct labour cost of $63 250 (253 000 minutes at $.25 per minute). Each shirt sells for $20. What is Mary's flexible budget variance? $3358 F $3358 U $5789F $ 5789 U

Answer 1

Flexible Budget Variance
Particular	Standard	Actual
Production and Sales	25000.00	23000.00
Selling Price	20.00	20.00
Direct Material in yards	2.50	2.58
Price per yard of DM	1.30	1.30
Total DM	62500.00	59340.00
Total DM Cost	81250.00	77142.00
Direct Labour in Minutes	15.00	11.00
Price per minutes	0.20	0.25
Direct Labour Cost	75000.00	63250.00
Sales	500000.00	460000.00
Profit	343750.00	319608.00
Profit Per Unit	13.75	13.90
Difference in Profit Per Unit		0.15
Favorable Variance                 ( 23000*0.15)		3358.00

Answer : (A) 3358 (F)