Lynn Company uses a standard cost system. Overhead is applied on the basis of direct labour hours (DLH), and the annual practical capacity of 42,000 DLH is used in establishing the standard overhead rates. The following summarizes budget and actual data for the past year:

During the year, 90,000 units were sold. There were no beginning or ending work-in-process inventories, but there were 3,000 units of finished goods on hand at the end of the year.

The direct materials flexible budget variance is

a. $11,032 favourable

b. $ 8,968 unfavourable

c. $ 4,968 unfavourable

d. $ 2,968 unfavourable

e. $ 0

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Budget Actual Units produced 100,000 92,000 Direct materials (kg) 50,000 47,840 Direct labour hours (DLH) 40,000 37,720 Production costs: Direct materials $200,000 $188,968 $500,000 $ 80,000 $160,000 Direct labour $471,500 $ 84,640 $162,000 Variable factory overhead Fixed factory overhead *Applied