1 When preparing flexible budget, in which of the following scenarios can ABC Corporation NOT have favorable flexible budget variance for direct materials? When direct material price variance is ________, and when direct material quantity variance is ________, Select one: a

1 

Correct Answer is b. Unfavorable ; Unfavorable

When direct material price variance is unfavourable and when direct material quantity variance is unfavourable, ABC Corporation can not have favorable flexible budget variance for direct materials.

Material Price Variance = (Standard Rate - Actual Rate )Actual Quantity

Material Quantity Variance = (Standard Quantity- Actual Quantity )Standard Rate

Material Cost Variance = Material Price Variance +Material Quantity Variance.

If Both (Material Price Variance & Material Quantity Variance) the variance is unfavourable then it will definately result in Unfavourable Material cost Variance .There is no chance of having favourable material Cost Variance.

If in any case any of the variance is Favourable it may result in Favourable material Cost Variance.

Thus ,Correct Answer is b. 

2 

Answer is C. $ 400,000

Budgeted Prodution in a month = 10000 units

Direct labour hours required to complete each unit = 0.5 hour

Direct labour cost per hour = $80

Total budgeted cost of direct labour in a month = (10000*.5*80) = $400000