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:

A) $220,417
B) $224,667
C) $231,500
D) $236,750

Answer 1

To calculate the total budget for the cutting department, determine the total variable costs by adding the actual direct labor and direct materials expenses. Then, calculate the standard variable cost per hour by dividing the total variable costs by the actual hours of production. Finally, calculate the appropriate total budget by adding the total fixed costs to the product of the standard variable cost per hour and the budgeted hours of production.

Step-by-step explanation:

To calculate the total budget for the cutting department, we need to determine the total variable costs. The variable costs are the sum of the actual direct labor and direct materials expenses. In this case, the actual direct labor is given as $130,000 and the actual direct materials is given as $157,000. So the total variable costs would be $130,000 + $157,000 = $287,000. Next, we need to calculate the standard variable cost per hour of production. The standard variable cost per hour is the total variable costs divided by the actual hours of production. In this case, the actual hours of production is given as 10,700. So the standard variable cost per hour would be $287,000 / 10,700 = $26.88.

Finally, we can calculate the appropriate total budget by adding the total fixed costs to the product of the standard variable cost per hour and the budgeted hours of production. The total fixed costs are given as $11,000 and the budgeted hours of production are given as 7,200. So the appropriate total budget would be $11,000 + ($26.88 * 7,200) = $220,416. This is closest to option A) $220,417.