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 4,000, 6,000, and 7,000 units.

Master Budget Flexible Budget Flexible Budget Flexible Budget (5,000 Units) (4,000 Units) (6,000 Units) (7,000 Units) Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 15,000 S 30,000 S 8,000 S 18,000 S 71,000 $ 12,000 24,000 6,400 18,000 60,400 Total manufacturing cost

Explanation / Answer

Direct material cost/unit=(15000/5000)=$3

Direct labor cost/unit=(30000/5000)=$6

Variable manufacturing overhead cost/unit=(8000/5000)=$1.6

Note:Total fixed costs and variable cost/unit does not change with change in units.

5000 4000 6000 7000 Direct materials 15000 12000 18000 21000 Direct labor 30000 24000 36000 42000 Variable manufacturing overhead 8000 6400 9600 11200 Fixed manufacturing overhead 18000 18000 18000 18000 Total manufacturing oost 71000 60400 81600 92200

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