Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12, what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets?
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question

Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12, what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets? 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Quizplus · Accepted Answer

Process-time variance = (Actual hours x Actual rate) - (Actual hours x Budgeted rate)
= (15,200 x $12) - (14,000 x $11)
= $182,400 - $154,000
= $28,400

The performance report that incorporates static and flexible budgets would compare actual hours and costs to both the original budget and the revised flexible budget based on the actual level of activity. The process-time variance would be calculated based on the flexible budget rate of $11 per hour, since that was the rate that was originally budgeted for the planned level of activity. Therefore, the correct answer is choice C.

Bunnie's Bakery Anticipated Making 17,000 Fancy Cakes During a Recent