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Micromatic company's static budget for 14,000 units of production includes $56,000 for direct materials, $28,000 for direct labor, utilities of $7,000, and supervisor salaries of $18,000. a flexible budget for 16,000 units of production would show .

a. direct materials of $56,000, direct labor of $42,000, utilities of $7,000, and supervisor salaries of $21,000
b. direct materials of $64,000, direct labor of $32,000, utilities of $8,000, and supervisor salaries of $18,000
c. the same cost structure in total
d. total variable costs of $126,800

User JofryHS
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Final answer:

The flexible budget for 16,000 units would include $64,000 for direct materials, $32,000 for direct labor, $8,000 for utilities, and $18,000 for supervisor salaries, with the supervisor salaries being a fixed cost that does not change with production levels.

Step-by-step explanation:

To determine the flexible budget for 16,000 units, we must adjust the variable costs proportionally based on the increase in production volume, keeping the fixed costs constant. The Micromatic Company's static budget for 14,000 units includes $56,000 for direct materials, $28,000 for direct labor, $7,000 for utilities (a variable cost), and $18,000 for supervisor salaries (a fixed cost).

To calculate the flexible budget for 16,000 units, we start with the variable costs. The increased production from 14,000 to 16,000 units represents an increase of about 14.29% (2000/14000). Assuming direct materials and direct labor are variable costs, we scale them up by 14.29%:

  • Direct Materials: $56,000 + (14.29% of $56,000) = $56,000 + $8,000 = $64,000
  • Direct Labor: $28,000 + (14.29% of $28,000) = $28,000 + $4,000 = $32,000
  • Utilities: As a variable cost, it's also increased by 14.29%: $7,000 + (14.29% of $7,000) = $7,000 + $1,000 = $8,000

Supervisor salaries, however, are a fixed cost, so they will remain unchanged at $18,000. Thus, the flexible budget at 16,000 units would show direct materials of $64,000, direct labor of $32,000, utilities of $8,000, and supervisor salaries of $18,000.

User JackMorrissey
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