Exercise 22-12 Venetian Company has two production departments, Fabricating and
ID: 2598972 • Letter: E
Question
Exercise 22-12 Venetian Company has two production departments, Fabricating and Assembling. At a department managers' meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following. 1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $51,000 in the Fabricating Department and $44,000 in the Assembling Department. 2. At normal capacity of 51,300 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $161,295 in the Fabricating Department, and $116,333 in the Assembling Department. State the total budgeted cost formula for each department. (Round cost per direct labor hour to 2 decimal places, e.g. 1.25.) Fabricating Department = CE of $ per direct labor hour Fixed Costs Variable Costs Assembling Department of $ + total per direct labor hour Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 54,300 and 48,300, in the Fabricating and Assembling Departments, respectively. Fabricating Department Assembling Department The total budgeted cost sExplanation / Answer
a. Total budgeted cost formula for each department is :
Fabricating department
Fixed Cost is $51,000
Variable Cost is ($161,295-$51,000) divided by $51,300 = 2.15 per direct labour hour
So formula is 51,000+ 2.15 per direct labour hour
Assembling department
Fixed Cost is $44,000
Variable Cost is ($116,633-$44,000) divided by $51,300 = 1.42 per direct labour hour
So formula is 44,000+ 1.42 per direct labour hour
b. Total budgeted Cost is:
Fabricating department
$51,000+ 2.15*54,300 = 167,745
Assembling department
$44,000+ 1.42*48,300 = 112,586
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