At Jacobson Company,indirect labor is a variable cost that varies with direct labor-hours.Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 F.If 24,100 direct labor-hours were actually worked last month,then the flexible budget cost formula for indirect labor must be (per direct labor-hour):
A) $0.20
B) $0.25
C) $0.30
D) $0.35

Question

Quizplus · Accepted Answer

11ea7761_174b_1142_81a5_5392dbcbb492_TB2580_00 Since the spending variance is Favorable, the Flexible budget amount must be greater than the Actual results.
$245 = Flexible budget - Actual results
$245 = Flexible budget - $5,780
Flexible budget = $6,025
Flexible budget = Variable cost per direct labor-hour × 24,100 direct labor-hours
$6,025 = Variable cost per direct labor-hour × 24,100 direct labor-hours
Variable cost per direct labor-hour = $6,025 ÷ 24,100 direct labor-hours = $0.25 per direct labor-hour

At Jacobson Company,indirect Labor Is a Variable Cost That Varies