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

Answer 1

Answer:

the value that should be recorded for variable cost is $66,375

Explanation:

The computation of the value that should be recorded for variable cost is shown below:

= Total variable cost ÷ budgeted units × flexible budget units

= ($22,000 + $25,000 + $12,000) ÷ 8,000 units × 9,000 units

= $59,000 ÷ 8,000 units × 9,000 units

= $66,375

hence, the value that should be recorded for variable cost is $66,375

The above formula is used