Friou Corporation Manufactures and Sells a Single Product

question 181

Multiple Choice

Friou Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 6,300 units, but its actual level of activity was 6,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for July:

Data used in budgeting:
Actual results for July:
-The direct labor in the planning budget for July would be closest to:

• A)$27,295
• B)$28,350
• C)$28,125
• D)$27,513

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, enabling more accurate budgeting in variable cost categories.

Single Level

Referring to a structure or system that operates or is organized at one layer or stage without any subdivisions or hierarchical levels.

Activity Levels

Activity Levels in cost accounting refer to the volume of production or operations that can significantly influence costs, guiding how businesses adjust their spending and operational strategies.

Static Budget Report

A financial report based on the assumption of a fixed level of activity and expenditure, without adjusting for variations in actual performance.