Venetian Company has two production departments, Fabricating and Assembling. At

Question

Venetian Company has two production departments, Fabricating and Assembling. At a department managers meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following. 1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $ 53,000 in the Fabricating Department and $ 43,000 in the Assembling Department. 2. At normal capacity of 46,100 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $ 131,370 in the Fabricating Department, and $ 93,710 in the Assembling Department. Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 49,100 and 43,100, in the Fabricating and Assembling Departments, respectively.

Explanation / Answer

Part 1

Therefore Fixed cost in Fabricating Department is    = $53000

And Variable cost per direct labour hours =   $0

2. At zero direct labour hours, Total Budgeted cost in Assembling Department is    = $43000

Therefore Fixed cost in Assembling department is    = $43000

And Variable cost per direct labour hours =   $0

Fabricating Department

Total Budgeted cost   =$ 131370

Fixed Cost = $53000

Variable Cost / hour= (131370-53000)/46100

                                    = $1.7/hour

Therefore

Total Budgeted Cost Formula = Fixed Cost + (Direct labour Hour* Variable Cost /hour)

                               = $ 53000 + $ (46100*1.7)

                                            =$ 53000 + $ 78370

                                          = $131370

Assembling Department

Total Budgeted cost   =$ 93710

Fixed Cost = $43000

Variable Cost / hour= (93710-43000)/46100

                                    = $1.1/hour

Therefore

Total Budgeted Cost Formula = Fixed Cost + ( Direct labour Hour* Variable Cost /hour)

                                           = $ 43000 + $ (46100*1.1)

                                            =$ 43000 + $ 50710

                                          = $93710

Part 2

a) When direct labour hours = 49100 hours

Fabricating Department

Fixed Cost =$ 53000

Variable Cost =$ 1.7/hour

(As always calculated at normal capacity)

Total Budgeted Cost Formula = Fixed Cost + (Direct labour Hour* Variable Cost /hour)

                               = $ 53000 + $ (49100*1.7)

                                            =$ 53000 + $ 83470

                                          = $136470

Assembling Department

Fixed Cost =$ 53000

Variable Cost =$ 1.7/hour

(As always calculated at normal capacity)

Total Budgeted Cost Formula = Fixed Cost + (Direct labour Hour* Variable Cost /hour)

                                = $ 43000 + $ (49100*1.1)

                                            =$ 43000 + $ 54010

                                          = $97010

b) When direct labour hours = 43100 hours

Fabricating Department

Fixed Cost =$ 53000

Variable Cost =$ 1.7/hour

(As always calculated at normal capacity)

Total Budgeted Cost Formula = Fixed Cost + (Direct labour Hour* Variable Cost /hour)

                               = $ 53000 + $ (43100*1.7)

                                            =$ 53000 + $ 73270

                                          = $126270

Assembling Department

Fixed Cost =$ 53000

Variable Cost =$ 1.7/hour

(As always calculated at normal capacity)

Total Budgeted Cost Formula = Fixed Cost + (Direct labour Hour* Variable Cost /hour)

                                = $ 43000 + $ (43100*1.1)

                                            =$ 43000 + $ 47410

                                          = $90410

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

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