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Colorado Springs Ltd. produces and sells bottled water. The company’s controller has the following information available...

Colorado Springs Ltd. produces and sells bottled water. The company’s controller has the following information available from the static budget of one of the product lines for the month of April:

Estimated production 20 000 units

Direct material per unit 2 ounces

Direct material cost per unit $.15 per ounce

Actual production during April was 18 000 units and actual direct materials cost was $6300.

If the company prepares a exible budget for April, direct materials cost is estimated to be？

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Answer #1

Ans. Flexible budget is prepared on the basis of actual units produced.

Direct material cost = Actual production * Direct material per unit of output * Direct material cost per unit

= 18,000 * 2 * $0.15

= $5,400

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