Question

Because C Company has an operating environment with considerable uncertainty, it prepares flexible budgets for several different volume levels. The per unit budgeted variable costs for direct materials, direct labor, supplies, indirect labor, and power are $7, $10, $1, $.50 and $.05 respectively. The budgeted fixed overhead for the period is Supervision of $4,000 and Depreciation of $3,000 and Rent of $2,000. What is the difference in total flexible budget costs between the volume range of 4,000 units and 5,000 units?

Group of answer choices

A) $0

B) $9,275

C) $1,000

D) $17,000

E) $18,550

Answer 1

Answer = E:  $18550

Explanation

Fixed Costs remain the same at different volme of production. So at both 4000 and 5000 units of production level, it will be the same .

Variable Costs remains the same per unit bu Total Variable costs changes with the change in production units.

Total Variable Cost per unit =  $7 + $10+  $1 +$.50 + $.05 = $18.55 per unit

Variable Costs to produce 4000 units = $74200

Variable Costs to produce 5000 units = $92750

Difference in costs = $18550

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