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

Production costs:

Variable:

Direct materials $ $ $ $

Direct labor

Variable overhead:

Supplies

Maintenance

Power

Total variable costs $ $ $ $

Fixed overhead:

Supervision $ $ $

Depreciation

Other overhead

Total fixed costs $ $ $

Total production costs $ $ $

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 $

3. 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.

by $ per unit

Answer 1

1.

	Variable cost per unit	Units	Units	Units
		160,000	170,000	175,000
Production cost
Variable
Direct Materials	7.20	1,152,000	1,224,000	1,260,000
Direct Labour	1.54	246,400	261,800	269,500
Variable Overheads
Supplies	0.23	36,800	39,100	40,250
Maintenance	0.19	30,400	32,300	33,250
Power	0.18	28,800	30,600	31,500
Total variable costs	9.34	1,494,400	1,587,800	1,634,500
Fixed overhead
Supervision		98,000	98,000	98,000
Depreciation		76,000	76,000	76,000
Other overhead		245,000	245,000	245,000
Total fixed costs		419,000	419,000	419,000
Total production cost		1,913,400	2,006,800	2,053,500

2.

	Unit cost	Cost per unit
160,000	1,913,400	11.96
170,000	2,006,800	11.80
175,000	2,053,500	11.73

3. If maintenance cost rose by $0.03 per unit to 0.22 per unit

	Unit cost	Cost per unit
160,000	1,913,400 + (160,000 x 0.03) = 1,918,200	11.99
170,000	2,006,800 + (170,000 x 0.03) = 2,011,900	11.83
175,000	2,053,500 + (175,000 x 0.03) = 2,058,750	11.76