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5 May, 05:16

At Mahlon Company, a manufacturer of boats, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 F. If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) :

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  1. 5 May, 07:38
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    The flexible budget cost formula for indirect labor must be (per direct labor-hour) is $0.25

    Explanation:

    For computing the direct labor hour rate, we have to use the formula which is shown below

    = (Actual indirect labor cost + favorable associated spending variance):

    total direct labor hours

    where,

    Actual indirect labor cost is $5,780

    Favorable associated spending variance is $245

    And, the total direct labor hour is $24,100

    Now put these values to the above formula

    So, the answer would be equal to

    = ($5780 + $245) : 24,100 hours

    = $6,025 : 24,100 hours

    = $0.25

    Since the variance comes in favorable so we added in the actual indirect labor cost.

    Hence, the flexible budget cost formula for indirect labor must be (per direct labor-hour) is $0.25
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