Question

Jensen Automotive produces alternators for American-made cars. They generally use a static budget with the following costs based on 8,000 units per month: Indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000. If Jensen wanted to create a flexible budget for 9,000 units, what value would they record for variable costs?
A : $70,875
B : $52,875
C : $66,375
D : $91,125

Answer 1

Answer:

The correct answer is C.

Explanation:

Giving the following information:

They generally use a static budget with the following costs based on 8,000 units per month: Indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000.

Unitary variable costs= (22,000 + 25,000 + 12,000)/8,000= 59,000/8,000= 7.375

Units= 9,000

Total variable cost= 9,000*7.375= 66,375