Jeff Olson Company has the following information available: The cost driver of product costs is units of output.What is the flexible budget variance for direct material costs?
A)$20,000 Unfavorable
B)$20,000 Favorable
C)$60,000 Favorable
D)$60,000 Unfavorable

Question

Jeff Olson Company has the following information available:  The cost driver of product costs is units of output.What is the flexible budget variance for direct material costs?
A)$20,000 Unfavorable 
B)$20,000 Favorable 
C)$60,000 Favorable 
D)$60,000 Unfavorable

Quizplus · Accepted Answer

Without knowing the actual and flexible budget amounts, we cannot calculate the actual direct material costs or the flexible budget variance. Therefore, none of the options C or D can be correct. Option B, $20,000 favorable, is unlikely given that the cost driver for product costs is units of output, meaning that there is a direct relationship between the number of units produced and the amount of direct material costs incurred. If the company produced more units than expected, the direct material costs should increase, resulting in an unfavorable flexible budget variance. Therefore, option A, $20,000 unfavorable, is the best choice based on the information provided.

Jeff Olson Company Has the Following Information Available: the Cost