Based on past experience, a company has developed the following budget formula f

Question

Based on past experience, a company has developed the following budget formula for estimating its shipping expenses. The company's shipments average 18 lbs. per shipment: Shipping costs = $22,000 + ($0.50 × lbs. shipped). The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule:

The actual shipping costs for the month amounted to $27,450. The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be:

a)27,450

b)33,900

c)28,450

d)32,550

plan actual Sales order 860 840 Shipments 860 880 Unit shipped 8600 9400 Sales 126,000 150,000 Total pounds shipped 10,200 12,900

Explanation / Answer

Appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation,

Shipping costs =$22000+($0.50*lbs.shipped) = 22000+($0.50*12900) = $28450

Therefore correct answer is option c I.e. $28450

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