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The following information is available for F Co in the latest period
Original budget Flexed budget Actual results
Sales and production (units) 11,200 9,500 9,500
$’000 $’000 $’000
Sales revenue
Direct material
Direct labour
Overhead
ProfitWhich of the following statements is correct?
1. Budgeted production volumes were achieved during the period
2. Direct labour is a variable cost
3. The actual selling price per unit exceeded the standard selling price per unit
4. Direct material cost savings were achieved against the budget cost allowanceI have calculated the selling price and answer 3 is correct but why is answer 2 wrong
It seems that you have not typed out the whole question because you have not given the $ amounts.
If the labour cost per unit is the same, then it is a variable cost. However if the cost per unit is not the same then it becomes a semi-variable cost (part variable and past fixed).
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