Production - Jars of sauce 20,000 Ingredient cost (variable) $16,000 Labor cost
ID: 2824757 • Letter: P
Question
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 26,000 jars of sauce reflecting anticipated sales increase related to a new marketing campaign
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
Explanation / Answer
Particulars
Base
Per Unit Cost
May Budget Cost
Production - Jars of sauce
20,000
26,000
Ingredient cost (variable)
$16,000
=16000/20000= $0.8
$20,800
Labor cost (variable)
$9,000
=9000/20000= $0.45
$11,700
Rent (fixed)
$4,000
Not applicable
$4,000
Depreciation (fixed)
$6,000
Not applicable
$6,000
Other (fixed)
$1,000
Not applicable
$1,000
Total
$36,000
Total
$69,500
Fixed will not change because it doesn’t get impacted with increase in units of production
New Ingredient cost = $0.8 x 26000 = $20800
New Labor Cost = $0.45 x 26000 = $11700
Particulars
Base
Per Unit Cost
May Budget Cost
Production - Jars of sauce
20,000
26,000
Ingredient cost (variable)
$16,000
=16000/20000= $0.8
$20,800
Labor cost (variable)
$9,000
=9000/20000= $0.45
$11,700
Rent (fixed)
$4,000
Not applicable
$4,000
Depreciation (fixed)
$6,000
Not applicable
$6,000
Other (fixed)
$1,000
Not applicable
$1,000
Total
$36,000
Total
$69,500
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