Question

At the beginning of the period, the Fabricating Department budgeted direct labor of $99,000 and equipment depreciation of $44,000 for 5,500 hours of production. The department actually completed 7,100 hours of production.

Required:
Determine the budget for the department, assuming that it uses flexible budgeting.

Answer 1

Fabricating Department

Flexible budget for the period:

Flexible Planned

Budget Budget Variance

Production hours 7,100 5,500 1,600 hours

Direct labor $127,800 $99,000 $28,800

Equipment depreciation 44,000 44,000 0

Total cost $171,800 $143,000 $28,800

Step-by-step explanation:

a) Data and Calculations:

Budgeted direct labor = $99,000

Equipment depreciation = $44,000

Budgeted production hours = 5,500 hours

Actual production hours = 7,100 hours

Flexible Budget:

Direct labor = $99,000 * 7,100/5,500 = $127,800

Equipment depreciation = $44,000

Total cost = $171,800