Question

Problem 2             

                  Favor Company budgeted the following amounts:

Variable costs of production:
	Direct materials	5 pounds @ $2.00 per pound
	Direct labor	0.50 hours @ $20.00 per hour
	Variable overhead	0.50 hours @ $4.00 per hour

Fixed overhead:
	Materials handling	$9,000
	Rent	$2,300

Required:

Prepare a flexible budget for 1,500 units, 1,800 units and 2,100 units.

Answer 1

Statement showing Flexible Budget at various production levels
	Particulars		1,500 units	1,800 units	2,100 units
	Direct materials	5 pounds @ 2.00 per Pound	$       15,000	$       18,000	$       21,000
	Direct labor	0.50 hrs @ 20.00 per hr	$       15,000	$       18,000	$       21,000
	Variable overhead	0.50 hrs @ 4.00 per hr	$       30,000	$       36,000	$       42,000
A	Total Variable Cost		$       60,000	$       72,000	$       84,000
	Fixed Cost
	Material handling		$         9,000	$         9,000	$         9,000
	Rent		$         2,300	$         2,300	$         2,300
B	Total Fixed Cost		$       11,300	$       11,300	$       11,300
C= A+ B	Total Cost		$       71,300	$       83,300	$       95,300