Question

SanBox Company is choosing new cost drivers for its accounting system. One driver is labor hours; the other is a combination of machine hours for unit variable costs and number of setups for a pool of batch-level costs. Data for the past year follow.

Budget Actual
Labor hours 200,000 200,000
Machine hours 360,000 450,000
Number of setups 3,000 3,300
Unit variable cost pool $1,600,000 $2,000,000
Batch-level cost pool $900,000 $990,000
Assume that the two separate pools are used. The flexible budget amounts for the actual level of machine hours and actual number of setups are:
Unit Variable Cost Pool Batch-Level Cost Pool
A. $1,600,000 $900,000
B. $1,600,000 $990,000
C. $2,000,000 $900,000
D. $2,000,000 $990,000
E. $2,500,000 $0

Answer 1

The correct flexible budget amounts for the unit variable cost pool and batch-level cost pool, after adjusting for actual activity levels, are $2,000,000 and $990,000, respectively. This reflects a 25% increase due to more machine hours and a 10% increase due to more setups than initially budgeted.

Step-by-step explanation:

The student is asking for the calculation of the flexible budget amounts for a company's cost drivers at the actual levels of activity for machine hours and number of setups. This question involves understanding how to adjust budgeted cost pools based on actual activity levels to determine a flexible budget.

To find the flexible budget for the unit variable cost pool and the batch-level cost pool, we need to adjust the budgeted amounts proportionally to the actual activity levels. For machine hours, the actual was 450,000 compared to the budgeted 360,000, which is an increase of 25% (450,000/360,000). Thus, we increase the unit variable cost pool by 25%, from $1,600,000 to $2,000,000. For the number of setups, the actual was 3,300 versus the budgeted 3,000, which is an increase of 10% (3,300/3,000), and so we increase the batch-level cost pool by 10%, from $900,000 to $990,000.

The correct flexible budget amounts for the actual levels of machine hours and setups would be $2,000,000 for the Unit Variable Cost Pool and $990,000 for the Batch-Level Cost Pool, which corresponds to option D.