Production - Jars of sauce |
20,000 |
Ingredient cost (variable) |
$16,000 |
Labor cost (variable) |
9,000 |
Rent (fixed) |
4,000 |
Depreciation (fixed) |
6,000 |
Other (fixed) |
1,000 |
Total |
$36,000 |
Using this information, prepare a budget for May stating the total amount for the May budget. Assume the budget will increase to 26,000 jars of sauce reflecting anticipated sales increase related to a new marketing campaign
Particulars |
Base |
Per Unit Cost |
May Budget Cost |
Production - Jars of sauce |
20,000 |
26,000 |
|
Ingredient cost (variable) |
$16,000 |
=16000/20000= $0.8 |
$20,800 |
Labor cost (variable) |
$9,000 |
=9000/20000= $0.45 |
$11,700 |
Rent (fixed) |
$4,000 |
Not applicable |
$4,000 |
Depreciation (fixed) |
$6,000 |
Not applicable |
$6,000 |
Other (fixed) |
$1,000 |
Not applicable |
$1,000 |
Total |
$36,000 |
Total |
$69,500 |
Fixed will not change because it doesn’t get impacted with increase in units of production
New Ingredient cost = $0.8 x 26000 = $20800
New Labor Cost = $0.45 x 26000 = $11700
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