Christian and Sons\' static budget for 10,357 units of production includes $38,9

Question

Christian and Sons' static budget for 10,357 units of production includes $38,947 for direct materials, $54,217 for direct labor, utilities of $6,735, and supervisor salaries of $15,561. What would flexible budget show for 13,280 units of production? Select the correct answer. total variable costs of $115,460 direct materials of $38,947, direct labor of $69,518, utilities of $6,735, and supervisor salaries of $15,561 the same cost structure in total direct materials of $49,939, direct labor of $69,518, utilities of $8,636, and supervisor salaries of $15,561

Explanation / Answer

The direct material, direct labour,utilities are variable in nature. Increase in output increases these type of expenses as it is directly related with output and vice versa. While salaries are fixed in nature it does not change if the output changes within a range.

There are two options for production of 13280:

Second option is correct. as production has increased from 10357 to 13280. So there would be increase in

Direct Material= $49939

Direct Labour= $69518

utilities= $8636

But supervisor salary will remain fixed= $15561

Original Budget Fixed Cost Variable Cost variable cost per unit USD$

Units produced 10357

   Direct material 38947 3.7604

   Direct labour 54217 5.3248

   Utilities 6735 .65028

Salaries 15561

so For 13280 units cost is

Direct Material (3.7604*13280) 49939

Direct labour(5.2348*13280) 69518

Utilities (.65028*13280) 8636

Salary 15561

2nd option is correct

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