Question

Christiansen and Sons' flexible budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, utilities of $5,000, and supervisor salaries of $15,000. A flexible budget for 12,000 units of production would show:

Answer 1

Answer:

Direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $15,000.

Explanation:

For 10,000 units:

Direct materials (DM) = $50,000

Direct labor (DL) = $44,000

Utilities (U) = $5,000

Supervisor salaries (S) = $15,000.

For 12,000 units:

Direct materials (DM):

$DM=\ 50,000*\frac{12,000}{10,000}\\DM = \ 60,000$

Direct labor (DL):

$DL=\ 44,000*\frac{12,000}{10,000}\\DL = \ 52,800$

Utilities (U) = $5,000

$U=\ 5,000*\frac{12,000}{10,000}\\U = \ 6,000$

Supervisor salaries (S) = $15,000.

Salaries don't rely on production volume and, thus, should stay the same.