Beal Manufacturing Co.\'s static budget at 10,000 units of production includes $

Question

Beal Manufacturing Co.'s static budget at 10,000 units of production includes $72,000 for direct labor and $12,000 for direct materials. Total fixed costs are $58,000.

Instructions

a.     Determine how much would appear on Beal's flexible budget for 2013 if 18,000 units are produced and sold.

b.     How would this comparison differ if a static budget were used instead of a flexible budget for performance evaluation?

a.                                       10,000 Units          Unit Variable Cost       18,000 Units

        Variable costs:

        Direct labor                  $72,000                        $0.00                  $

Direct materials             12,000                                 $0.00                      18,000

                                              84,000                                                    

        Fixed costs                    58,000                                                     48,000

        Total costs                 $142,000                                                  

I need help completing A and B. Could you also verify everything under 10,000 units. Thank you

Explanation / Answer

Flexible budgets are more capable of adapting to changing conditions in the market place. In a static budget, the company would not have the ability to tweak the budget to manage the changes if that client contract doesn't materialize or if sales grow faster than anticipated. The flexible budget solves this problem, providing both senior executives and middle management with dynamic guidance on how much to spend based on the business' changing reality.

a) Budget for Beals flexible budget for 2013 at an output of 18000 units

Here, If company is going by static budget, the company will have to charge $255600 as cost ($14.2 x 18000 units).but if the company is following flexible bdgeting, per unit variable cost and toal fixed cost are considered, cost will be actual as given in the above table. When it comes to performance evaluation, Static budget will show a larger cost and profit will be shown less. In flexible budget, actual profit will be shown as such performance evaluation will be more much more effective.

particulars unit 10000 per unit cost for unit 18000 Direct Materials 12000 1.2 129600 Direct Labour 72000 7.2 21600 Variable cost 84000` 8.4 151200 Fixed cost 58000 5.8 58000 Total cost 142000 14.2 209200

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.