If the master budget prepared at a volume level of 10,000 units includes direct materials of $40,000, a flexible budget based on a volume of 12,000 units would include direct materials of $48,000.
Answer the following statement true (T) or false (F)
True
Standard cost per unit = Standard cost ÷ Expected volume
Standard direct material cost per unit = $40,000 ÷ 10,000 units = $4.00 per unit
Flexible budget = Standard cost per unit × Actual volume
Flexible budget at a level of 12,000 units = $4.00 per unit × 12,000 units = $48,000
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