Question

Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In 2011, AVO estimated the following standard costs for one of their most well-loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples.

During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.

September's direct material flexible-variance is:

                            Budgeted Material                        Budgeted Price

Direct Material      1.5 pounds                                 $7.25 per pound

Direct Labor           0.25 hours                                  $14.00 per hour

1. Non of these answers are correct
2. $100 favorable
3. $100 unfavorable
4. $75 unfavorable

Answer 1

Answer:

Direct Material Flexible Variance = (Actual Direct Materials Used X Cost per Direct Material) - (Actual Units X Standard Direct Material per unit X Budgeted Price per Direct Material) Direct Material Flexible Variance = (1,875 X 7) - (1200 X 1.5 X 7.25) Direct Material Flexible Variance = $13,125 - $13,050 Direct Material Flexible Variance = $75 Unfavorable It is unfavorable because actual direct material cost is more than standard cost of direct material required.