Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the month of December showed an estimated production of 4,000 widgets in December. During December, 4,300 widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to Hoppe's flexible budget for December?
A) $14,400
B) $15,050
C) $14,000
D) $15,480

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget for direct materials cost based on the actual production level of 4,300 widgets:

Flexible budget direct materials cost = (actual quantity of raw material used / standard quantity of raw material per unit) x standard cost per unit of raw material
Flexible budget direct materials cost = (4,300 x 2.25 / 2.5) x 1.40
Flexible budget direct materials cost = $14,910

Next, we can calculate the actual direct materials cost based on the actual production level and cost per unit of raw material:

Actual direct materials cost = actual quantity of raw material used x actual cost per unit of raw material x number of units produced
Actual direct materials cost = 4,300 x 2.25 x 1.60
Actual direct materials cost = $15,330

Since the actual direct materials cost is higher than the flexible budget direct materials cost, it suggests that there was an unfavorable direct materials usage variance and direct materials price variance.

Therefore, the answer is B ($15,050) as it represents the flexible budget direct materials cost at the actual production level.

Hoppe Inc Manufactures Widgets