Coderre Corporation manufactures and sells a single product. The company uses un
ID: 2409082 • Letter: C
Question
Coderre Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 7,300 units, but its actual level of activity was 7,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for July Data used in budgeting Fixed element Variable element per month per unit Revenue Direct labor Direct materials Manufacturing overhead Selling and administrative expenses otal expenses $%0 0 30,000 26,100 $56,100 $34.80 $6.80 13.30 2.30 80 $23.20 Actual results for July Revenue Direct labor Direct materials Manufacturing overhead Selling and administrative expenses $30,530 $253,600 $48,970 $98,250 $46,500 The spending variance for direct materials in July would be closest to O $1160 U O $1,825 F O $1,160 F O $1,825 UExplanation / Answer
Cost formula for Direct Materials = $13.30 per unit
Actual level of activity = 7,250 units
Flexible Budget for Direct Materials = $13.30 * 7,250
Flexible Budget for Direct Materials = $96,425
Spending Variance for Direct Materials = Actual Cost of Direct Materials - Flexible Budget for Direct Materials
Spending Variance for Direct Materials = $98,250 - $96,425
Spending Variance for Direct Materials = $1,825 Unfavorable