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24 July, 03:47

At the beginning of the period, the Grinding Department budgeted direct labor of $19,800 and property tax of $51,000 for 1,100 hours of production. The department actually completed 1,500 hours of production.

Required:

Determine the budget for the department, assuming that it uses flexible budgeting.

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  1. 24 July, 04:03
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    Budget for the Grinding department is $78,000, assuming that it uses flexible budgeting.

    Explanation:

    Note: Fixed cost remain constant at any level of production

    Budgeted Direct labor at 1,100 hours of production is

    = Budgeted direct labor / hours

    = 19,800 / 1,100

    =$18 per hour

    Direct labor cost at 1,500 hours of production is:

    =1,500 * $18

    =$27,000

    Budget for the Grinding department at 1,500 hour of production is:

    =Direct labor cost + Property tax

    =$27,000 + $51,000

    =$78,000
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