Beal Manufacturing Co.'s static budget at 12,000 units of production includes $72,000 for direct labor and $12,000 for direct materials. Total fixed costs are $48,000. (a) Determine how much would appear on Beal's flexible budget for 2016 if 18,000 units are produced and sold. Total Cost $

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Business

Ulises

6 April, 16:47

Beal Manufacturing Co.'s static budget at 12,000 units of production includes $72,000 for direct labor and $12,000 for direct materials. Total fixed costs are $48,000. (a) Determine how much would appear on Beal's flexible budget for 2016 if 18,000 units are produced and sold. Total Cost $

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Amy Austin · Answer 1

Flexible Budget for 18,000 units $

Direct labour ($6 x 18,000) 108,000

Direct material ($1 x 18,000) 18,000

Total fixed cost 48,000

Total cost 174,000

Direct labour cost per unit = $72,000/12,000 units = $6 per unit

Direct material cost per unit = $12,000/12,000 units = $1 per unit

Explanation:

In this case, we need to determine the direct labour cost per unit by dividing the total labour cost in the static budget by the units of production in the static budget. We also need to calculate the direct material cost per unit by dividing the total material cost in the static budget by the units of production in the static budget. Then, we will multiply the direct labour cost per unit and direct material cost per unit by the units of flexible budget. The total fixed cost remains fixed throughout the level of activities.