Question

Wind Productions uses flexible budgets. Items from the budget for March in which 3,000 units were produced and sold appear below: Direct materials$18,000 Indirect materials - variable2,000 Supervisor salaries15,000 Depreciation on factory equipment4,000 Direct labor10,000 Property taxes on factory1,000
If Wind prepares a flexible budget at 4,000 units, compute its total variable cost.
Total variable cost$

Answer 1

Answer:

$40,000

Explanation:

For computing the total variable cost, first we have to determine the variable cost per unit which is shown below:

= (Direct materials cost + Indirect materials - variable + Direct labor cost) ÷ (number of units produced and sold)

= ($18,000 + $2,000 + $10,000) ÷ (3,000 units)

= ($30,000) ÷ (3,000 units)

= $10 per unit

Now the total variable cost would be

= $4,000 units × $10 per unit

= $40,000