Final answer:
To determine the department's budget using flexible budgeting, divide the budgeted amounts by the budgeted hours and then multiply by the actual hours of production.
Step-by-step explanation:
To determine the department's budget using flexible budgeting, we first need to calculate the budgeted direct labor and equipment depreciation per hour of production. Then, we can use these figures to determine the department's budget for the actual hours of production completed.The department's budget using flexible budgeting is $105,800 for direct labor and $46,000 for equipment depreciation.
Given that the department budgeted direct labor of $87,400 and equipment depreciation of $38,000 for 3,800 hours of production, we can calculate the budgeted direct labor per hour as $87,400 divided by 3,800, which equals $23 per hour. Similarly, the budgeted equipment depreciation per hour can be found by dividing $38,000 by 3,800, resulting in $10 per hour.
To determine the department's budget for the actual hours of production completed (4,600 hours), we multiply the actual hours by the budgeted direct labor and equipment depreciation per hour. The budgeted direct labor for 4,600 hours is $23 multiplied by 4,600, resulting in $105,800. The budgeted equipment depreciation for 4,600 hours is $10 multiplied by 4,600, resulting in $46,000. Therefore, the department's budget using flexible budgeting is $105,800 for direct labor and $46,000 for equipment depreciation.
The student's question relates to the concept of flexible budgeting in a manufacturing setting. Flexible budgeting allows a company to adjust its budget based on actual output levels rather than fixed estimates. Given that the fabricating department initially budgeted for 87,400 in direct labor and 38,000 for equipment depreciation at 3,800 hours of production, we need to calculate the new budget for 4,600 hours of production.