For 2017 X Company estimated production of 3400 units of fin

For 2017, X Company estimated production of 3,400 units of finished product and direct material cost of $22,406. Actual production in 2017 was 2,700 units of finished product, and actual direct material cost was $13,590. What was the direct material cost flexible budget variance in 2017 (assume that a positive number means a favorable variance and a negative number means an unfavorable variance)?

Solution

Standard cost of direct material per unit = 22406/3400 = 6.59

Actual cost of direct material per unit = 13590/2700 = 5.03

Direct material cost flexible budget variance = AQ * (AP-SP) =2700*(5.03-6.59)= - 4212 = 4212 Favorable