Answer (B) is correct . The standard per-unit cost of direct materials can be found by dividing the total cost at either budgeted level of production by the units at that level ($15,000 ÷ 10,000 = $1.50 per unit or $22,500 ÷ 15,000 = $1.50 per unit). Since 12,000 units were actually consumed, the flexible budget for direct materials, that is, the amount that should have been spent given the achieved level of production, was $18,000 (12,000 × $1.50). The difference between the flexible budget and the actual amount spent on direct materials is the flexible budget variance ($18,000 – $20,000 = $2,000 U).
Answer (A) is incorrect because Reversing the order of subtraction results in $2,000 favorable.
Answer (C) is incorrect because Improperly treating the production range in units as a dollar variance results in $5,000 favorable.
Answer (D) is incorrect because Improperly treating the production range in units as a dollar variance results in $5,000 unfavorable.
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