Exhibit 10-2
Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels).Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units.
-Refer to Exhibit 10-2.What amount would the flexible budget show for direct materials?
A)$1,000,000
B)$350,000
C)$140,000
D)$875,000
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

To calculate the flexible budget for direct materials, we need to multiply the actual number of units produced (35,000) by the budgeted amount of direct materials per unit (2.5 pounds).

35,000 units x 2.5 pounds per unit = 87,500 pounds

Then, we can multiply the total pounds of direct materials by the budgeted cost per pound.

87,500 pounds x $10.00 per pound = $875,000

Therefore, the answer is D, $875,000.

Exhibit 10-2 Benny's Bakery Produces Bagels for Resale at Local Grocery Stores.The