Paradigm Toys

Flexible Budget Performance Report

Budget Actual Difference

Favorable (F)

Unfavorable (U)

Production in units 18,000 18,000

Direct labor

Direct labor hours (1 hour/unit) 18,000 18,200 200 (U)

Direct labor costs ($20/hour) $360,000 $354,900 $5,100 (F)

Direct Materials

Quantity (.5/unit) 9,000 9,300 300 (U)

Dollars ($20/unit) $360,000 $375,000 $15,000 (U)

Variable costs

Indirect materials 720,000 700,000 20,000 (F)

Indirect labor 324,000 288,000 36,000 (F)

Utilities 198,000 176,000 22,000 (F)

Total variable costs 1,242,000 1,164,000 78,000 (F)

Fixed costs

Depreciation 300,000 300,000 0

Property taxes 50,000 50,000 0

Supervision 120,000 120,000 0

Total fixed costs 470,000 470,000 0

Total costs 1,712,000 1,634,000 78,000 (F)

What is an explanation for the change in direct labor costs?