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21 June, 10:12

In Rooney Company, direct labor is $20 per hour. The company expects to operate S at 10,000 direct labor hours each month. In January 2017, direct labor totaling $206,000 b is incurred in working 10,400 hours. Prepare (a) a static budget report and (b) a flexible P budget report. Evaluate the usefulness of each repor.

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  1. 21 June, 12:26
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    Answer and Explanation:

    The preparation is presented below;

    a. For a static budget report

    Product line Budget Actual Difference

    Direct labor $200,000 $206,000 $6,000 unfavorable

    (10,000 direct labor hours * $20 per hour)

    It is unfavorable as the budget is less than the actual

    b. For a flexible budget report

    Product line Budget Actual Difference

    Direct labor $208,000 $206,000 $2,000 favorable

    (10,400 direct labor hours * $20 per hour)

    It is favorable as the budget is more than the actual
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