Question

Venetian Company has two production departments, Fabricating and Assembling. At a department managers’ meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following.

1.		At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $51,000 in the Fabricating Department and $41,000 in the Assembling Department.
2.		At normal capacity of 53,400 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $179,160 in the Fabricating Department, and $147,800 in the Assembling Department.

(a)

	Your answer is correct.

State the total budgeted cost formula for each department. (Round cost per direct labor hour to 2 decimal places, e.g. 1.25.)

Fabricating Department	=	$ Fixed CostsVariable Costs + total Fixed CostsVariable Costs of $ per direct labor hour
Assembling Department	=	$ Fixed CostsVariable Costs + total Fixed CostsVariable Costs of $ per direct labor hour

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(b)

	Your answer is incorrect. Try again.

Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 56,400 and 50,400, in the Fabricating and Assembling Departments, respectively.

		Fabricating Department		Assembling Department
The total budgeted cost		$		$

Answer 1

a
Variable cost:
Fabricating Department	2.40	=(179160-51000)/53400
Assembling Department	2.00	=(147800-41000)/53400
Fabricating Department = $51000 Fixed Costs + total Variable Costs of $2.40 per direct labor hour
Assembling Department = $41000 Fixed Costs + total Variable Costs of $2.00 per direct labor hour

b
The total budgeted cost :
Fabricating Department	186360	=51000+(56400*2.40)
Assembling Department	141800	=41000+(50400*2.00)