Question

At the beginning of the period, the cutting department budgeted direct labor of $130,000, direct materials of $157,000, and fixed factory overhead of $11,000 for 7,200 hours of production. The department actually completed 10,700 hours of production. The appropriate total budget for the department, assuming it uses flexible budgeting, is ____ (round your final answer to the nearest dollar; do not round interim calculations).

Answer 1

The appropriate total budget for the department, using flexible budgeting and adjusting for the actual production hours, is $437,702.

Step-by-step explanation:

To use flexible budgeting to find the appropriate total budget for the cutting department, we start by calculating the variable costs on a per-hour basis and then adjust for the actual hours of production. Since fixed costs remain constant regardless of production hours, we can add the budgeted fixed factory overhead to the adjusted variable costs. Here is the step-by-step calculation:

• Calculate the budgeted variable costs per hour: Budgeted direct labor + Budgeted direct materials = $130,000 + $157,000 = $287,000 for 7,200 hours. Therefore, variable cost per hour is $287,000 / 7,200 hours = $39.86.
• Determine the variable costs for actual production hours: $39.86 per hour × 10,700 hours = $426,702 (rounded).
• Add fixed costs: Since fixed costs do not change, add the budgeted fixed factory overhead of $11,000.
• Total flexible budget: $426,702 + $11,000 = $437,702.

The appropriate total budget for the department, assuming it uses flexible budgeting, is $437,702 (rounded to the nearest dollar).