Question

Flexible Budget for Varying Levels of Activity

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

Direct materials	$7.10
Direct labor	1.54
Variable overhead:
Supplies	0.23
Maintenance	0.19
Power	0.17

Budgeted fixed overhead costs per month include supervision of $98,000, depreciation of $77,000, and other overhead of $242,000.

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		$	$	$

2. 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

Nashler Company
Flexible Budget
	Variable cost per unit	160,000	170,000	175,000
Production costs:
Variable:
Direct materials	7.10	1,136,000	1,207,000	1,242,500
Direct labor	1.54	246,400	261,800	269,500
Variable overhead:
Supplies	0.23	36,800	39,100	40,250
Maintenance	0.19	30,400	32,300	33,250
Power	0.17	27,200	28,900	29,750
Total variable costs	9.23	1,476,800	1,569,100	1,615,250
Fixed overhead:
Supervision	98,000	98,000	98,000	98,000
Depreciation	77,000	77,000	77,000	77,000
Other overhead	242,000	242,000	242,000	242,000
Total fixed costs	417,000	417,000	417,000	417,000
Total production costs		1,893,800	1,986,100	2,032,250
2.Per unit cost
	Per UNIT cost = Total cost/Number of units
160,000	11.84
170,000	11.68
175,000	11.61
3.All unit costs will increase by $0.22 - 0.19 i.e. 0.03 per unit