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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Flexible Budget for Various Levels of Production

Budgeted amounts for the year:

Chapter 9, Problem 62E, Flexible Budget for Various Levels of Production Budgeted amounts for the year: Required: 1. Prepare

Required:

  1. 1. Prepare a flexible budget for 3,500, 4,000, and 4,500 units.
  2. 2. CONCEPTUAL CONNECTION Calculate the unit cost at 3,500, 4,000, and 4,500 units. (Note: Round unit costs to the nearest cent.) What happens to unit cost as the number of units produced increases?

1.

To determine

Present a flexible budget for various levels of activities given in the question.

Explanation

Flexible Budgets:

Flexible budgets are prepared for various levels of activities or outputs. This enables the entity to know the result for the selected level of activity.

Presentation of flexible budget:

ParticularsAmount ($)Amount ($)Amount ($)
Units: 3,5004,0004,500
Material cost

(7×2×3,500)

49,000

(7×2×4,000)56,000(7×2×4,500)63,000
Add: Labor cost

(18×1.5×3,500)

94,500

(18×1.5×4,000)

108,000

(18×1.5×4,500)121,500
Add: Variable overhead

(1.2×1.5×3,500)

6,300

(1.2×1.5×4,000)7,200(1.2×1.5×4,500)8,100
Add: Fixed overhead6,8006,8006,800
Total cost156,600178,000199,400

Table (1)

Working Notes:

1

2.

To determine

Compute unit cost at various levels of activities given in the question. Also, describe the effect on unit cost as the level increases.

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