Question

Prepare a flexible budget for 8,000, 9,000, and 10,000 units of output, given the following data:

Variable costs:		Budgeted fixed overhead	$90,000
Direct materials	$5
Direct labor	4
Overhead	8

Answer 1

Flexible Budget
	Per Unit	Units
Variable Costs		8,000	9,000	10,000
Direct Materials	5	40,000	45,000	50,000
Direct Labor	4	32,000	36,000	40,000
Overhead	8	64,000	72,000	80,000
Total Variable Costs		1,36,000	1,53,000	1,70,000
Fixed Overhead		90,000	90,000	90,000

Notes:

At 8,000 Units, Total Variable Cost = Direct Material Per Unit* 8,000 Units + Direct Labor Per Unit * 8,000 Units + Overhead Per Unit * 8,000 Units

For 9,000 and 10,000 Units, the per unit variable cost is multiplied with the number of unit

Fixed Overhead remains same at every level of output.