Mama Italiano Sauce is in the process of preparing a production cost budget for

Question

Mama Italiano Sauce is in the process of preparing a production cost budget for May. The actual costs in April were: Mama Italian Sauce Production Cost Budget April 2008 Production - Jars of sauce 20,000 Ingredient cost (variable) $16,000 Labor cost (variable) 9,000 Rent (fixed) 4,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $36,000 Using this information, prepare a budget for May stating the total amount for the May budget. Assume the budget will increase to 24,500 jars of sauce reflecting anticipated sales increase related to a new marketing campaign

Explanation / Answer

Mama Italian Production budget for May April (Actual) May ( Estimated) For 20,000 Units For 24,500 Units Particular Per Unit Total Per Unit Total Variable cost Ingredient Cost $      0.80 $        16,000.00 $      0.80 $ 19,600.00 Labor Cost $      0.45 $          9,000.00 $      0.45 $ 11,025.00 Fixed Cost Rent $          4,000.00 $    4,000.00 Depreciation $          6,000.00 $    6,000.00 Others $          1,000.00 $    1,000.00 Total Cost $        36,000.00 $ 41,625.00

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