Aaron\'s chairs is in the process of preparing a production cost budget for Augu
ID: 2644496 • Letter: A
Question
Aaron's chairs is in the process of preparing a production cost budget for August. Actual costs in July for 120 chairs were:
Materials cost
$4,650
Labor cost
2,680
Rent
1,500
Depreciation
2,500
Other fixed costs
3,200
Materials and labor are the only variable costs. If production and sales are budgeted to increase to 140 chairs in August, how much is the expected total variable cost on the August budget?
Materials cost
$4,650
Labor cost
2,680
Rent
1,500
Depreciation
2,500
Other fixed costs
3,200
Explanation / Answer
Since total variable cost is confined to Material and labour cost
Hence, we need to figure out per chair material cost and labour cost.
Per Chair Material Cost = 4650/120 = $ 38.75
Per Chair labour Cost = 2680/120 = $ 22.33
Hence total variable cost for August = Per chair material cost * 140 + Per chair labour cost* 140
= 38.75*140 + 22.33*140
Total Variable cost on August Budget = $ 8551.20
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.