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

Question

Quizplus · Accepted Answer

The flexible budget cost formula for indirect labour can be found by first determining the budgeted cost for indirect labour. Since the actual cost was $5,780 and there was a favorable variance of $245, the budgeted cost was $5,780 + $245 = $6,025. To find the cost per direct labour hour, divide the budgeted cost by the actual direct labour hours worked: $6,025 / 24,100 = $0.25 per direct labour hour.

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