Question

Flexible Budget for Fabrication Department

Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Assembly. Assume the following information for the Assembly Department:

Direct labor per filing cabinet	30 minutes
Supervisor salaries	$141,000 per month
Depreciation	$21,000 per month
Direct labor rate	$21 per hour

Prepare a flexible budget for 8,000, 10,000, and 12,000 filing cabinets for the month of August, similar to Exhibit 5, assuming that inventories are not significant. Enter all amounts as positive numbers.

Steelcase Inc. - Assembly Department
Month Ending August 31
(Assumed Data)
Units of production	8,000	10,000	12,000
Variable cost:
	$	$	$
Fixed cost:
	$	$	$
Total fixed cost	$	$	$
Total department cost	$	$	$

Answer 1

• All working forms part of the answer
• Under flexible budget, variable expense changes with the change in the level of activity but fixed costs remain the same.
• Requirement solved:

Steelcase Inc. - Assembly Department
Month Ending August 31
(Assumed Data)
Units of production	8,000	10,000	12,000
Variable cost:
Direct Labor cost	$           84,000.00 [8000 units x (30/60) hours x $21 per hour]	$                 1,05,000.00 [10,000 units x (30/60) hours x $21 per hour]	$        1,26,000.00 [12,000 units x (30/60) hours x $21 per hour]
Fixed cost:
Supervisor Salaries	$       1,41,000.00	$                 1,41,000.00	$        1,41,000.00
Depreciation	$           21,000.00	$                     21,000.00	$            21,000.00
Total fixed cost	$       1,62,000.00	$                 1,62,000.00	$        1,62,000.00
Total department cost	$       2,46,000.00	$                 2,67,000.00	$        2,88,000.00