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Swifty Corporation produced 232,000 units in 114,000 direct labor hours. Production for the period was estimated at 246,000 units and 123,000 direct labor hours.

A flexible budget would compare budgeted costs and actual costs, respectively, at:

A. 123,000 hours and 114,000 hours
B. 128,000 hours and 123,000 hours
C. 128,000 hours and 114,000 hours
D. 114,000 hours and 114,000 hours

Answer :

A flexible budget is designed to compare budgeted costs with actual costs based on different levels of activity. In this case, the actual direct labor hours are 114,000, while the budgeted direct labor hours are 123,000.

Therefore, a flexible budget would compare the budgeted costs and actual costs at 123,000 hours and 114,000 hours.

By comparing these two data points, management can analyze the variance between the expected costs and the actual costs incurred during the production period. This analysis helps in identifying any inefficiencies or deviations from the planned budget, allowing for adjustments and improved decision-making moving forward.

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