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At the beginning of the period, the Cutting Department budgeted direct labor of $37,260 and supervisor salaries of $43,370 for 4,140 hours of production. The department actually completed 4,500 hours of production.

Determine the budget for the department assuming that it uses flexible budgeting.

Answer 1

To determine the flexible budget for the Cutting Department, we need to use the information provided to adjust the original budget for the actual level of production.

First, we need to calculate the variable cost per hour of production:

Variable cost per hour = Direct labor / Hours of production

Variable cost per hour = $37,260 / 4,140 hours

Variable cost per hour = $9

Next, we can use this variable cost per hour to calculate the flexible budget for the actual level of production:

Flexible budget = (Variable cost per hour x Actual hours of production) + Fixed costs

Flexible budget = ($9 x 4,500 hours) + $43,370

Flexible budget = $40,500 + $43,370

Flexible budget = $83,870

Therefore, the flexible budget for the Cutting Department, based on the actual level of production of 4,500 hours, is $83,870.