Question

At the beginning of the period, the Assembly Department budgeted direct labor of $120,000 and property tax of $16,000 for 5,000 hours of production. The department actually completed 5,600 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting.

Answer 1

Budgeting : The process of creating a budget involves the management estimating the organization's future activities in order to compile the financial statement. In order to do daily tasks, it is also beneficial.

Calculation of Budget for the Department

Flexible Budget

Particulars	Amount$
Variable Cost :
Direct labor	134,400
Fixed Cost :
Property tax	16,000
Total Department costs	150,400

Calculation of direct labor cost per hour

Department budgeted direct labor = $120,000

Total production hours = 5,000

Direct labor cost = $120,000 / 5,000 hrs

=$24 per hour

Calculation of amount of actual direct labor

Direct labor cost per hour = $24

Total actual production hours = 5,600

Actual direct labor cost = $24 x 5,600 hrs

=$134,400

 

 

 Therefore, the total department cost is $150,400