Mama Italiano Sauce is in the process of preparing a production cost budget for

Question

Mama Italiano Sauce is in the process of preparing a production cost budget for May. The actual costs in April were:

Mama Italian Sauce

Production Cost Budget

April 2008

Production - Jars of sauce            20,000

Ingredient cost (variable)             $16,000

Labor cost (variable)                       9,000

Rent (fixed)                                        4,000

Depreciation (fixed)                       6,000

Other (fixed)                                     1,000

Total                                                      $36,000

Using this information, prepare a budget for May stating the total amount for the May budget. Assume the budget will increase to 22,500 jars of sauce reflecting anticipated sales increase related to a new marketing campaign

Explanation / Answer

PRODUCTION COST BUDGET PARTICULARS April May Production - Jars 20000 22500 AMOUNT AMOUNT $ $ Ingredient cost 16000 18000 =(16000/20000*22500) Labour 9000 10125 =(9000/20000*22500) Rent 4000 4000 Depreciation 6000 6000 Other 1000 1000 Total cost 36000 39125

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