Final answer:
At 8,000 units of production, Chelsea Manufacturing Co.'s flexible budget would show fixed costs of $23,000 and variable costs of $72,000 (for direct labor and electric power), making the total costs $95,000.
Step-by-step explanation:
The student is asking about the preparation of a flexible budget at different levels of production for Chelsea Manufacturing Co. This involves calculating the total costs, which include fixed and variable costs, at a production level of 8,000 units.
Based on the information provided, we know the static budget at 5,000 units includes $40,000 for direct labor (a variable cost), $5,000 for variable electric power (another variable cost), and $23,000 in total fixed costs. Since the fixed costs remain constant regardless of the production level, they will still be $23,000 at 8,000 units of production.
To determine the flexible budget for 8,000 units, we calculate the variable costs proportionally. The variable cost per unit for direct labor is $40,000 / 5,000 units = $8 per unit, and for electric power is $5,000 / 5,000 units = $1 per unit. At 8,000 units, the total variable costs for direct labor would be 8,000 units * $8/unit = $64,000, and for electric power would be 8,000 units * $1/unit = $8,000. Therefore, the flexible budget for 8,000 units would show:
- Total fixed costs: $23,000
- Total variable costs (direct labor + electric power): $64,000 + $8,000 = $72,000
- Total costs (fixed + variable): $23,000 + $72,000 = $95,000