Question

Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it assembles filing cabinets in an Assembly Department. Assume the following information for the Assembly Department: Direct labor per filing cabinet 20 minutes Supervisor salaries $135,000 per month Depreciation $16,000 per month Direct labor rate $18 per hour Prepare a flexible budget for 9,000, 11,000, and 14,000 filing cabinets for the month of August in the Assembly Department, similar to Exhibit 5. Assuming that inventories are not significant. Enter all amounts as positive numbers. CABINAIRE INC-ASSEMBLY DEPARTMENT Flexible Production Budget For the Month Ending August 31 (assumed data) Units of production 9,000 11,000 14,000 Variable cost: Direct labor $ $ $ Total variable cost $ $ $ Fixed cost: Supervisor salaries $ $ $ Depreciation Total fixed cost $ $ $ Total department cost

Answer 1

Flexible Production Budget For the Month Ending August 31 is as follows:

CABINAIRE INC-ASSEMBLY DEPARTMENT

   Flexible Production Budget For the Month Ending August 31

	$	$	$
Units of production	9,000	11,000	14,000
Variable Cost:
Direct Labor	54,000(A)	66,000(B)	84,000(C)
Total Variable Cost (1)	54,000	66,000	84,000
Fixed Cost:
Supervisor Salary	135,000	135,000	135,000
Depreciation	16,000	16,000	16,000
Total Fixed Cost (2)	151,000	151,000	151,000
Total department cost (1 + 2)	$ 205,000	$ 217,000	$ 235,000

Working Notes:

(A) Direct Labour

Units Produced 1 hour = 60 minutes / 20 minutes = 3 Units

Direct Labour($) = 9,000 units/ 3 Units * $18 = $54,000

(B) Direct Labour

Units Produced 1 hour = 60 minutes / 20 minutes = 3 Units

Direct Labour($) = 11,000 units/ 3 Units * $18 = $66,000

(C) Direct Labour

Units Produced 1 hour = 60 minutes / 20 minutes = 3 Units

Direct Labour($) = 14,000 units/ 3 Units * $18 = $84,000