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24 August, 14:48

cost formula is expressed as follows: Y = $17PH + $760,000 where PH is defined as process hours. What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost formula?

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  1. 24 August, 17:50
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    B. $ 1,984,000 $ 2,112,000

    Explanation:

    Static budget is a budget that has been prepared for a standard level of output with no tendency to vary irrespective of the level of output.

    Therefore, the figure that will appear in static budget is as follows:

    Y = $16PH + $640,000 where PH is defined as process hours

    PH = 84,000 (Budgeted output)

    Y = $16 (84,000) + $640,000

    Y = $1,344,000 + $640,000

    Y = $1,984,000

    That is the figure that will appear in the static budget is $1,984,000

    Flexible budget is a budget designed to vary with the level of actual activity.

    Therefore the figure that will appear in the flexible budget is as follows:

    Y = $16PH + $640,000 where PH is defined as process hours

    PH = 92,000 (Budgeted output)

    Y = $16 (92,000) + $640,000

    Y = $1,472,000 + $640,000

    Y = $2,112,000

    That is the figure that will appear in the flexible budget is $2,112,000
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