Rodger\'s Cabinet Manufacturers uses flexible budgets that are based on the foll

Question

Rodger's Cabinet Manufacturers uses flexible budgets that are based on the following manufacturing data for the month of July:

Straight-line depreciation

Prepare a flexible budget for Rodger's based on production of 10,000, 15,000, and 20,000 units.

$2,900 per month

Direct materials $8 per unit Direct labor $5 per unit Electric power (variable) $0.30 per unit Electric power (fixed) $4,000 per month Supervisor salaries $25,000 per month Property taxes on factory $4,000 per month

Straight-line depreciation

Prepare a flexible budget for Rodger's based on production of 10,000, 15,000, and 20,000 units.

$2,900 per month

Explanation / Answer

Fixed costs remain constant at all levels of output , therefore it will remain unchanged aat all three levels of output.

Further Variable costs vary in direct proportion with level of output, therefore it is directly caculated by multiplying cost per unit with level of output

Flexible Budget Cost Units produced 10000 15000 20000 Variable costs Direct Material 8 per unit 80000 120000 160000 Direct Labor 5 per unit 50000 75000 100000 Electric Power ( Variable) 0.30 per unit 3000 4500 6000 Total Variable 13.30 per unit 133000 199500 266000 Fixed costs Electric Power 4000 per month 4000 4000 4000 Supervisors salary 25000 per month 25000 25000 25000 Property tax on factory 4000 per month 4000 4000 4000 Depreciation 2900 per month 2900 2900 2900 Total Fixed 35900 per month 35900 35900 35900 Totsl Costs 168900 235400 301900

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