Question
A manufacturing company has prepared a flexible budget for the year 2023. The company expects to produce and sell 10,000 units of product A at
A manufacturing company has prepared a flexible budget for the year 2023. The company expects to produce and sell 10,000 units of product A at a selling price of $50 per unit. The flexible budget for the year is as follows:
Variable Costs:
Direct Materials: $10 per unit
Direct Labor: $15 per unit
Variable Manufacturing Overhead: $5 per unit
Fixed Costs:
Manufacturing Overhead: $30,000 per year
Selling and Administrative Expenses: $20,000 per year
However, due to unforeseen circumstances, the company only produced and sold 8,000 units of product A during the year. The actual costs incurred during the year were as follows:
Variable Costs:
Direct Materials: $85,000
Direct Labor: $132,000
Variable Manufacturing Overhead: $40,000
Fixed Costs:
Manufacturing Overhead: $32,000
Selling and Administrative Expenses: $22,000
What is the flexible budget variance for variable costs? What is the total budget variance for fixed and variable costs?
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