Cameron Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $25,000. At 8,000 units of production, a flexible budget would show: Group of answer choices a) variable costs of $64,000 and $25,875 of fixed costs b) variable costs of $64,000 and $25,000 of fixed costs c) variable costs of $72,000 and $25,000 of fixed costs d) variable and fixed costs totaling $112,000.

Question

Business

Izabella Farley

5 September, 07:53

Cameron Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $25,000. At 8,000 units of production, a flexible budget would show: Group of answer choices a) variable costs of $64,000 and $25,875 of fixed costs b) variable costs of $64,000 and $25,000 of fixed costs c) variable costs of $72,000 and $25,000 of fixed costs d) variable and fixed costs totaling $112,000.

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Gerald Adams · Answer 1

C) variable costs of $72,000 and $25,000 of fixed costs

Explanation:

To determine the flexible budget we must first calculate the variable costs of producing 8,000 units:

direct labor per unit = $40,000 / 5,000 units = $8 per unit

electric power per unit = $5,000 / 5,000 units = $1 per unit

total variable cost per unit = $8 + $1 = $9

Total variable costs for 8,000 units = 8,000 units x $9 per unit = $72,000

Total fixed costs = $25,000