Question

At the beginning of the period, the Cutting Department budgeted direct labor of $155,000, direct materials of $165,000, and fixed factory overhead of $15,000 for 9,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting?

Answer 1

Answer:

$370,556

Explanation:

Current costs:

• Direct labor = $155,000
• Direct material = $165,000
• Fixed factory overhead = $15,000
• total estimated costs = $335,000 (for 9,000 hours)

since the total number of hours was larger, 10,000, then we must adjust the budget:

total variable cost per hour = $320,000 / 9,000 hours = $35.556 per hour

since the factory operated for 10,000 hours, then total costs = $335,000 (total costs for 9,000 hours) + (variable costs = $35.55 per hour x 1,000 hours) = $335,000 + $35,556 = $370,556