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.

Homework Answers

Answer #1
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.
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