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

Question

Flexible Budget for Fabrication Department

Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:

Prepare a flexible budget for 10,000, 13,000, and 15,000 filing cabinets for the month of October 2016, similar to Exhibit 5, assuming that inventories are not significant. Enter all amounts as positive numbers.

Steel per filing cabinet 40 pounds Direct labor per filing cabinet 30 minutes Supervisor salaries $117,000 per month Depreciation $32,000 per month Direct labor rate $15 per hour Steel cost $1.28 per pound

Explanation / Answer

Cabinaire Inc- Fabrication Department

Flexible Production Budget

October 2016 ( assumed data)

665,600 (40*1.28*13,000)

768,000 (40*1.28*15,000)

Units of production 10,000 13,000 15,000 Variable cost : Direct labour(a) 75,000 (10,000*0.5*15) 97,500 (13,000*0.5*15) 112,500 (15,000*0.5*15) Direct materials(b) 512,000 (40*1.28*10,000)

665,600 (40*1.28*13,000)

768,000 (40*1.28*15,000)

Total variable cost(c) = (a+b) 587,000 763,100 880,500 Fixed cost : Supervisor salaries(d) 117,000 117,000 117,000 Depreciation(e) 32,000 32,000 32,000 Total fixed cost (f) = (d+e) 149,000 149,000 149,000 Total department cost (g) = (c+f) 736,000 912,100 1,029,500

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