Question

Flexible Budget for Varying Levels of Activity

Nashler Company has the following budgeted variable costs per unit produced:

Direct materials $7.20
Direct labor 1.54 Variable overhead:
Supplies 0.23
Maintenance 0.19
Power 0.18
Budgeted fixed overhead costs per month include
supervision of $98,000,
depreciation of $76,000,
and other overhead of $245,000.
Required:
1. Prepare a flexible budget for all costs of production for the following levels of production:
160,000 units, 170,000 units, and 175,000 units.
Round your answers to the nearest cent, if required. Nashler Company Flexible Budget Variable cost per unit Range of Production in Units 160,000 Range of Production in Units 170,000 Range of Production in Units 175,000

2 What if Nashler Company’s cost of maintenance rose to $0.22 per unit? How would that affect the unit product costs calculated in Requirement 2? If required, round your answer to the nearest cent.
Increase

• Increase
• Decrease

by $ per unit

3 what is the per-unit total product cost for each of the production levels from Requirement 1? (Round each unit cost to the nearest cent.)

	Per-unit Product Cost
160,000	$
170,000	$
175,000

Answer 1

Solution 1:

Nashler Company
Flexible Budget
Particulars	Flexible Budget	Range of Production
	Variable cost per unit	Volume - 160000 units	Volume - 170000 units	Volume - 175000 units
Variable costs:
Direct materials	$7.20	$1,152,000.00	$1,224,000.00	$1,260,000.00
Direct labor	$1.54	$246,400.00	$261,800.00	$269,500.00
Supplies	$0.23	$36,800.00	$39,100.00	$40,250.00
Maintenance	$0.19	$30,400.00	$32,300.00	$33,250.00
Power	$0.18	$28,800.00	$30,600.00	$31,500.00
Total Variable costs	$9.34	$1,494,400.00	$1,587,800.00	$1,634,500.00
Fixed Costs:
Supervision		$98,000.00	$98,000.00	$98,000.00
Other Depreciation		$76,000.00	$76,000.00	$76,000.00
Other overheads		$245,000.00	$245,000.00	$245,000.00
Total Fixed Costs		$419,000.00	$419,000.00	$419,000.00
Total Costs		$1,913,400.00	$2,006,800.00	$2,053,500.00

Solution 2:

If Nashler company cost of maintenance rose to $0.22 per unit, then unit product cost will increase by = $0.22 - $0.19 = $0.03 per unit

Solution 3:

Computation of Unit Product costs
Particulars	Volume - 160000 units	Volume - 170000 units	Volume - 175000 units
Total costs	$1,913,400.00	$2,006,800.00	$2,053,500.00
Production volume	160000	170000	175000
Unit product cost	$11.96	$11.80	$11.73