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30 April, 22:46

Gundy Company expects to produce 1,207,200 units of Product XX in 2017. Monthly production is expected to range from 75,600 to 117,600 units. Budgeted variable manufacturing costs per unit are direct materials $3, direct labor $7, and overhead $10. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 21,000 unit increments.

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  1. 30 April, 22:53
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    Answer and Explanation:

    The preparation of the flexible manufacturing budget is presented below:

    Activity level

    Finished units 75,600 96,600 117,600

    (75,600 + 21,000)

    Variable costs

    Direct materials ($3) $226,800 $289,800 $352,800

    Direct labor ($7) $529,200 $676,200 $823,200

    Overhead ($10) $756,000 $966,000 $1,176,000

    Total variable costs $1,512000 $1,932,000 $2,352,000

    Fixed costs

    Depreciation [ ($4 * 1,207,200) : 12] $402,400 $402,400 $402,400

    Supervision [ ($1 * 1,207,200) : 12] $100,600 $100,600 $100,600

    Total fixed costs $503,000 $503,000 $503,000

    Total costs $2,015,000 $2,435,000 $2,855,000

    We simply added the total variable and total fixed cost so that the total cost could come and the same is shown above
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