At the beginning of the period, the Assembly Department budgeted direct labor of $110,000, direct materials of $170,000, and fixed factory overhead of $28,000 for 8,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting? Round hourly rates to two decimal places.

Question

BlackTom AI · Accepted Answer

Flexible budgeting separates variable costs (which change with activity) from fixed costs (which remain constant). Direct labor and direct materials are treated as variable per production hour here, while fixed factory overhead stays constant regardless of hours.

1) Identify knowledge points
- Variable cost per hour = budgeted variable cost / budgeted hours.
- Flexible budget at actual activity = variable rate × actual hours + fixed costs.

2) Compute variable hourly rates (showing intermediate steps)
- Direct labor hourly rate = $110,000 ÷ 8,000 hours = $13.75 per hour.
- Direct materials hourly rate = $170,000 ÷ 8,000 hours = $21.25 per hour.
(Rates are already at two decimal places as required.)

3) Apply rates to actual hours (10,000 hours)
- Direct labor at actual activity = $13.75 × 10,000 = $137,500.
- Direct materials at actual activity = $21.25 × 10,000 = $212,500.
- Fixed factory overhead remains = $28,000.

4) Sum all components
- Total flexible budget = $137,500 + $212,500 + $28,000 = $378,000.

5) Why this answer is correct
The flexible budget correctly adjusts only the variable components (direct labor and materials) in proportion to the increase from 8,000 to 10,000 hours, while keeping fixed overhead unchanged. The calculated total $378,000 follows directly from those principles and the arithmetic above.

6) Why the other choices are incorrect
- $350,000: equals only the variable costs at 10,000 hours ($137,500 + $212,500) and omits the fixed overhead, so it is incomplete.
- $288,000 and $305,000: do not follow the correct flexible budgeting method (either miscompute hourly rates, improperly treat fixed costs as variable, or omit/add incorrect amounts) and do not match the correct component calculations shown above.

Final confirmation: the appropriate total flexible budget for the department at 10,000 hours is $378,000, which matches the provided correct answer.

类似问题

Which budget evaluates the results of operations at the actual level of activity?

Flexing the budget means

Variable cost per unit and total fixed costs remain constant in the relevant range. Therefore, total fixed costs should not change with the change in activity level and you would take the variable cost per unit times the new activity level to generate the flexible budget line item.

When the activity level of the master/planning/static budget differs from the activity level (cost driver, allocation base; e.g., machine hours), then a flexible budget is needed to match the same activity level that the actuals are based on to truly analyze revenue and spending variances.

Which of the following is TRUE of flexible budget?

The flexible budget for direct materials is computed in which of the following ways?

Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show

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