Exercise 11-31 Flexible Budget for Various Levels of Production Budgeted amounts

Question

Exercise 11-31 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.

2.CONCEPTUAL CONNECTION Calculate the unit cost at 3,500, 4,000, and 4,500 units. (Note:Round unit costs to the nearest cent.) What happens to unit cost as the number of units produced increases?

Materials

2 leather strips @ $7.00

Labor

1.5 hr. @ $18.00

VOH

1.5 hr. @ $1.20

FOH

$6,800

Explanation / Answer

Flexible Budget Units 3500 4000 4500 Per Unit Total Per Unit Total Per Unit Total Material 2*14 28 98000 28 112000 28 126000 Labour 1.5*18 27 94500 27 108000 27 121500 VOH 1.5*1.20 1.8 6300 1.8 7200 1.8 8100 FOH 1.942857 6800 1.7 6800 1.511111 6800 Total 58.74286 205600 58.5 234000 58.31111 262400 The cost per unit decreases as the number of units increases

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