Jensen Automotive produces alternators for American-made cars. They generally use a static budget with the following costs based on 8,000 units per month: Indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000. If Jensen wanted to create a flexible budget for 9,000 units, what value would they record for variable costs?

A : $70,875

B : $52,875

C : $66,375

D : $91,125

Question

Bradyn Mckenzie

Business

1 November, 00:52

Jensen Automotive produces alternators for American-made cars. They generally use a static budget with the following costs based on 8,000 units per month: Indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000. If Jensen wanted to create a flexible budget for 9,000 units, what value would they record for variable costs?

A : $70,875

B : $52,875

C : $66,375

D : $91,125

+5

Answers (1)

Know the Answer?

Philip Oconnell · Answer 1

The correct answer is C.

Explanation:

Giving the following information:

They generally use a static budget with the following costs based on 8,000 units per month: Indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000.

Unitary variable costs = (22,000 + 25,000 + 12,000) / 8,000 = 59,000/8,000 = 7.375

Units = 9,000

Total variable cost = 9,000*7.375 = 66,375