Question

At the beginning of the period, the Fabricating Department budgeted direct labor of $60,900 and equipment depreciation of $42,000 for 2,900 hours of production. The department actually completed 3,500 hours of production.

Determine the budget for the department, assuming that it uses flexible budgeting.

2.

Pasadena Candle Inc. projected sales of 35,000 candles for the year. The estimated January 1 inventory is 2,500 units, and the desired December 31 inventory is 4,000 units.

Prepare a production budget report in units for Pasadena Candle Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Pasadena Candle Inc.
Production Budget
For the Year Ending December 31
Expected units to be sold
Desired ending inventory, December 31
Total units available
Estimated beginning inventory, January 1
Total units to be produced

Answer 1

Ans. 1	Flexible budget is prepared on the basis of actual units.
	Particulars	Amount
	Equipment depreciation	$42,000
	Direct labor	$73,500
	Total flexible budget	$115,500
	*Direct labor = $60,900 / 2,900 * 3,500
	$73,500
	*Fixed expenses (equipment depreciation) remain same in planning budget and flexible budget.
Ans. 2	PASADENA   CANDLE   INC.
	Production Budget
	For the Year Ending December 31
	Particulars	Units
	Expected untis to be sold	35,000
	Add: Desired Ending inventory	4000
	Total units available	39,000
	Less: Beginning inventory	-2500
	Total units to be produced	36,500