Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50
Question:
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 is 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 was purchased and used.
What should be the total direct materials cost according to Hoppe's flexible budget for December?
a. $14,000
b. $15,480
c. $14,400
d. $15,050
2. Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $0.30 per pound are used. The static budget for the month of March showed an estimated production of 15,000 boxes in March. During March, 17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $0.40 per pound was purchased and used.
What should be the total direct materials cost according to Violetta's flexible budget for March?
a. $20,400
b. $18,000
c. $23,400
d. $26,520
Flexible budget is a management tool that is used to assess the causes of budget variances. A flexible budget is often called a variable budget since the variable costs in the budget is adjusted based on the actual output or level of production.