Question

# Flexible Budget for Various Levels of Production Budgeted amounts for the year: Materials 2 leather strips...

Flexible Budget for Various Levels of Production

Budgeted amounts for the year:

 Materials 2 leather strips @ \$7.00 Labor 1.5 hr. @ \$18.00 VOH 1.5 hr. @ \$1.20 FOH \$6,800

Required:

1. Prepare a flexible budget for 3,500, 4,000, and 4,500 units.

 Flexible Budget Variable Cost per Unit 3,500 units 4,000 units 4,500 units Direct materials \$ \$ \$ \$ Direct labor Variable overhead Fixed overhead Total \$ \$ \$

2. CONCEPTUAL CONNECTION Calculate the unit cost at 3,500, 4,000, and 4,500 units. (Note: Round unit costs to the nearest cent.)

Unit cost at 3,500 units \$

Unit cost at 4,000 units \$

Unit cost at 4,500 units \$

What happens to unit cost as the number of units produced increases?

The cost per unit  as the number of units produced increases because fixed cost is spread over a greater number of units.

 Flexible Budgets For the month year end Units of Production 3500 units 4000 units 4500 units Variable Costs: Direct Material \$49,000 \$56,000 \$63,000 Direct labor \$94,500 \$1,08,000 \$1,21,500 Variable Overhead Costs \$6,300 \$7,200 \$8,100 Total Variable costs \$1,49,800 \$1,71,200 \$1,92,600 Fixed Costs: Fixed Overhead Costs \$6,800 \$6,800 \$6,800 Total Fixed Costs \$6,800 \$6,800 \$6,800 Total Cost \$1,56,600 \$1,78,000 \$1,99,400 Cost per unit \$44.74 \$44.50 \$44.31 As the number of units increases the Cost per unit decreases.

#### Earn Coins

Coins can be redeemed for fabulous gifts.