Muntjac Corporation\'s flexible budget cost formula for indirect materials, a variable cost, is $0.75 per unit of output. Assume that actual units produced equals standard units produced. If the company\'s performance report for last month shows a $250 unfavorable spending variance for indirect materials and if 3,000 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been $______. l You must include your calculations Solution Since the actual number of units produced is equal to the standard units produced, there is no quantity variance Hence, if there is an unfavourable spending variance of $ 250 for indirect materials, and the budgeted cost is $ 0.75 per unit The actual costs incurred for the direct materials will be 3,000 X $ 0.75 + $ 250 = $ 2,250 + $ 250 = $ 2,500..

1. Muntjac Corporation's flexible budget cost formula for indirect materials, a variable cost, is
$0.75 per unit of output. Assume that actual units produced equals standard units produced. If the
company's performance report for last month shows a $250 unfavorable spending variance for
indirect materials and if 3,000 units of output were produced last month, then the actual costs
incurred for indirect materials for the month must have been $______. l
You must include your calculations
Solution
Since the actual number of units produced is equal to the standard units produced, there is no
quantity variance Hence, if there is an unfavourable spending variance of $ 250 for indirect
materials, and the budgeted cost is $ 0.75 per unit The actual costs incurred for the direct
materials will be 3,000 X $ 0.75 + $ 250 = $ 2,250 + $ 250 = $ 2,500.