Question

at the beginning of the period, the fabricating department budgeted direct labor of $76,800 and equipment depreciation of $16,500 for 2,400 hours of production. the department actually completed 2,200 hours of production. determine the budget for the department, assuming that it uses flexible budgeting.

Answer 1

The flexible budget for the department, given the actual production of 2,200 hours, would be $86,900, including $70,400 for direct labor and $16,500 for equipment depreciation.

Step-by-step explanation:

To calculate the flexible budget for the fabricating department, we need to adjust the initial budget based on the actual production hours.

The budgeted direct labor cost was $76,800 for 2,400 hours, which means the direct labor cost rate is $76,800 / 2,400 = $32 per hour. Since the department completed 2,200 hours, the flexible budget for direct labor would be 2,200 hours * $32/hour = $70,400.

The equipment depreciation is generally considered a fixed cost and would not vary with the number of production hours. Therefore, the budgeted equipment depreciation remains at $16,500.

The total flexible budget would be the sum of these two: Flexible Budget for Direct Labor + Equipment Depreciation = $70,400 + $16,500 = $86,900.