A company sells a product for $3. Direct materials are $1.80 per unit. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted direct materials will be ______.

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Multiple Choice

A company sells a product for $3. Direct materials are $1.80 per unit. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted direct materials will be ______.

Explanation:
Direct materials are a variable cost that changes with production volume. In a flexible budget, total direct materials cost equals the per-unit materials cost times the number of units produced. Here, the cost is $1.80 per unit, and at 50 units the calculation is 50 × 1.80 = 90. So budgeted direct materials are 90. The selling price ($3) doesn’t affect this calculation; it relates to revenue, not material cost.

Direct materials are a variable cost that changes with production volume. In a flexible budget, total direct materials cost equals the per-unit materials cost times the number of units produced. Here, the cost is $1.80 per unit, and at 50 units the calculation is 50 × 1.80 = 90. So budgeted direct materials are 90. The selling price ($3) doesn’t affect this calculation; it relates to revenue, not material cost.

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