Question

Jase Manufacturing Co.'s static budget at 8,000 units of production includes $32,000 for direct labor and $2,400 for electric power. Total fixed costs are $35,000. At 10,700 units of production, a flexible budget would show

a.variable and fixed costs totaling $69,400

b.variable costs of $46,010 and $46,813 of fixed costs

c.variable costs of $46,010 and $35,000 of fixed costs

d.variable costs of $34,400 and $35,000

Answer 1

At 10,700 units of production for Jase Manufacturing Co., a flexible budget would show variable costs of $46,010 calculated based on per-unit costs from the static budget, while fixed costs remain at $35,000, totaling $81,010.

Step-by-step explanation:

To answer the student's question on how a flexible budget would change at a different production level, we need to calculate the variable and fixed costs based on the given data. At 10,700 units of production, we adjust the variable costs proportionally from the static budget at 8,000 units. Direct labor and electric power are variable costs which would increase with the level of production, while fixed costs remain constant.

In Jase Manufacturing Co.'s case, the static budget includes $32,000 for direct labor and $2,400 for electric power. To find the variable costs at 10,700 units, we calculate the per unit variable cost at the 8,000 unit level (which is $32,000 + $2,400 = $34,400 for variable costs divided by 8,000 units, resulting in $4.30 per unit) and then multiply by the new production level (10,700 units * $4.30 = $46,010).

The fixed costs remain unchanged at $35,000 regardless of the production level. Therefore, the total of variable and fixed costs at the 10,700 unit production level is $46,010 for variable costs plus $35,000 for fixed costs, equaling $81,010.