Question

At the beginning of the period, the Cutting Department budgeted direct labor of $30,000 and supervisor salaries of $20,000 for 3,000 hours of production. The department actually completed 5,000 hours of production. Determine the budget for the department assuming that it uses flexible budgeting

Answer 1

Total labor cost= $70,000

Step-by-step explanation:

The supervisor salary is a fixed labor cost, it is unlikely that would change with production.

First, we need to calculate the unitary variable direct labor hour:

Unitary variable direct labor hour= 30,000 / 3,000

Unitary labor hour= $10

Now, the flexible budget for 5,000 hours:

Fixed cost= 20,000

Variable cost= 10*5,000= 50,000

Total labor cost= $70,000