Olive Company makes silver belt buckles. The company’s master budget appears in

Question

Olive Company makes silver belt buckles. The company’s master budget appears in the first column of the table.

Required:

Complete the table by preparing Olive’s flexible budget for 5,400, 7,400, and 8,400 units. (Round your intermediate calculations to 2 decimal places.)

Master Budget 6400 Units

Flexible Budget 5400 Units

Flexible Budget 7400 Units

Flexible Budget 8400 Units

Direct Materials

$ 1920

Direct Labor

3200

Variable manufacturing overhead

2560

Fixed Manufacturing Overhead

17900

Total manufacturing cost

25580

Olive Company makes silver belt buckles. The company’s master budget appears in the first column of the table.

Explanation / Answer

Solution:

We calculate items per unit and then multiply them with flexible budget units. For example,Calculations:

Direct material per unit = $1,920/6,400

Direct material per unit = $0.3 per unit

Flexible budget 5400 units

Direct materials = $0.3 per unit x 5,400

Direct materials = $1,620

Master Budget 6400 Units Flexible Budget 5400 Units Flexible Budget 7400 Units Flexible Budget 8400 Units Direct Materials 1920 1620 2220 2520 Direct Labor 3200 2700 3700 4200 Variable manufacturing overhead 2560 2160 2960 3360 Fixed Manufacturing Overhead 17900 17900 17900.00 17900.00 Total manufacturing cost 25580 24380 26780.00 27980.00

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