Question

Laramie, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Laramie had the following budgeted data: Budgeted variable costs per unit: Direct materials $7.00 Direct labor 10.00 Supplies 1.00 Indirect labor 0.50 Power 0.05 Budgeted fixed overhead for 2018: Supervision 4,000 Depreciation 3,000 Rent 2,000 What are the budgeted costs for rent if 5,000 units were produced

Answer 1

Answer:

$2,000

Explanation:

The cost incurred by an entity during production may be recognized in two groups namely the fixed costs and the variable cost.

While the fixed cost are cost elements that remain constant at a given range of activity levels, the variable cost change as the activity level (that is the units produced) changes.

The rental cost, supervision and depreciation are cost elements that are fixed.

Hence where 5,000 units were produced, budgeted cost for rent is $2,000.