Flexible Budget for Assembly Department Cabinaire Inc. is one of the largest man

Question

Flexible Budget for Assembly Department

Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it assembles filing cabinets in an Assembly Department. Assume the following information for the Assembly Department:

Prepare a flexible budget for 9,000, 11,000, and 14,000 filing cabinets for the month of March in the Assembly Department similar to Exhibit 5. Enter all amounts as positive numbers.

Direct labor per filing cabinet 20 minutes Supervisor salaries $129,000 per month Depreciation $33,000 per month Direct labor rate $21 per hour

Explanation / Answer

Direct labor per filing cabinet = 20 Minutes

Direct Labor Cost Per Hour = $ 21 per hour

Hence, Direct Labor Cost Per 20 Minutes = $ 21 / 60 *20

= $ 7

Hence, Direct Labor Cost at 9,000 Units = $ 7 * 9,000

Direct Labor Cost at 11,000 Units = $ 7 * 11,000

Direct Labor Cost at 14,000 Units = $ 7 * 14,000

Hence the correct answer is :

Cabinaire Inc. Assembly Department Budget Month Ending March 31 (assumed data) Units of production 9,000 11,000 14,000 Variable cost: Direct labor 63,000 77,000 98,000 Total variable cost 63,000 77,000 98,000 Fixed cost: Supervisor salaries 1,29,000 1,29,000 1,29,000 Depreciation 33,000 33,000 33,000 Total fixed cost 1,62,000 1,62,000 1,62,000 Total department costs 2,25,000 2,39,000 2,60,000

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