Question

Ershey’s Chocolates produces milk chocolate candy bars. The company currently uses a static budget process. The company’s controller prepared the following budget for October’s production:
Estimated production .............. 50,000 bars
Direct labor per bar ............... 3 minutes
Direct labor required for estimated production ... 2,500 hours
Average direct labor rate per hour ........ $15.00
Estimated direct labor cost ........... $37,500
Actual production during October was 53,000 bars and actual direct labor cost was $39,000.

Required
Prepare a flexible budget for Ershey’s Chocolates that shows the projected direct labor cost and any difference between the flexible budget and actual labor cost. Were the company’s labor costs over or under budget for the month?



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  • CreatedMarch 11, 2015
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