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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Flexible budget for Assembly Department    

Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it assembles filing cabinets in an Assembly Department. Assume the following information for the Assembly Department:

Direct labor per filing cabinet     12 minutes
Supervisor salaries $150,000 per month
Depreciation $24,500 per month
Direct labor rate $22 per hour

Prepare a flexible budget for 18,000, 20,000, and 22,000 filing cabinets for the month of August in the Assembly Department, similar to Exhibit 5.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

Production Budget shows the quantities of units that a company must produce to meet the budgeted sales and inventory.

To

Prepare: The flexible budget for 18,000, 20,000, and 22,000 filing cabinets for the month of August.

Explanation

The following table shows the flexible budget for 18,000, 20,000, and 22,000 filing cabinets.

Company S
Flexible Production Budget
For The Month Ending August 31
Particulars Amount ($) Amount ($) Amount ($)
Units of Production 18,000 20,000 22,000
Variable Costs:
Direct Labor 79,200(1) 88,000(2) 96,800(3)
Total Variable Cost 79,200 88,000 96,800
Fixed Cost:
Supervisor Salaries 150,000 150,000 150,000
Depreciation 24,500 24,500 24,500
Total Fixed Cost 174,500 174,500 174,500
Total Department Cost 253,700 262,500 271,300

Table (1)

Working Notes:

Calculate the direct labor for 18,000 units of production...

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