Problem P1-1 Budgets in Managerial Accounting Santiago\'s Salsa is in the proces

Question

Problem P1-1 Budgets in Managerial Accounting Santiago's Salsa is in the process of preparing a production   cost budget for May. Actual costs in April were: Santiago's Salsa Production Cost Budget April 2011 Production - Jars of salsa 25,000 Ingredient cost (variable) $20,000 Labor cost (variable) 12,000 Rent (fixed) 5,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $44,000 Required: Part a: Using this information, prepare a   budget for May. Assume that production will increase to 30,000 jars of salsa,   reflecting an anticipated sales increase related to a new marketing campaign. Santiago's Salsa Production Cost Budget May 2011 Production -   Jars of salsa 30,000 Ingredient   cost (variable) Amount Labor cost   (variable) Amount Rent (fixed) Amount Depreciation   (fixed) Amount Other (fixed) Amount Total Formula Part b.1: Does the budget suggest that   additional workers are needed? Suppose the wage rate is $20 per hour. How many   additional labor hours are needed in May? Title Number Title Number Title Number Title Formula Problem P1-1 Budgets in Managerial Accounting Santiago's Salsa is in the process of preparing a production   cost budget for May. Actual costs in April were: Santiago's Salsa Production Cost Budget April 2011 Production - Jars of salsa 25,000 Ingredient cost (variable) $20,000 Labor cost (variable) 12,000 Rent (fixed) 5,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $44,000 Required: Part a: Using this information, prepare a   budget for May. Assume that production will increase to 30,000 jars of salsa,   reflecting an anticipated sales increase related to a new marketing campaign. Santiago's Salsa Production Cost Budget May 2011 Production -   Jars of salsa 30,000 Ingredient   cost (variable) Amount Labor cost   (variable) Amount Rent (fixed) Amount Depreciation   (fixed) Amount Other (fixed) Amount Total Formula Part b.1: Does the budget suggest that   additional workers are needed? Suppose the wage rate is $20 per hour. How many   additional labor hours are needed in May? Title Number Title Number Title Number Title Formula

Explanation / Answer

Santiago's Salsa Production Cost Budget

MAY 2011

Production - Jars of salsa 30,000

Ingredient cost (variable) $24,000

Labor cost (variable) 14,400

Rent (fixed) 5,000

Depreciation (fixed) 6,000

Other (fixed) 1,000

Total $50,400

Part b.1:

yes

additional labor required = 2400/20 = 120

Part b.2:

If no additonal workers are engaged firm would incur an increase in profit for some jars and then sudden greater loss..incompetency

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