Question

At the beginning of the period, the Cutting Department budgeted direct labor of $52,350 and supervisor salaries of $42,150 for 3,490 hours of production. The department actually completed 3,800 hours of production. Determine the budget for the department assuming that it uses flexible budgeting.

Answer 1

$77,000

Step-by-step explanation:

Direct Labor = $52,350 (Its varies with the number of Production hours). Hence, $52,350 for 3,490 hours

For 3,800 hours, (52,350/3,490) * 3,800 = $57,000

Supervisor Salaries = $20,000 (Since the Supervisor Salary is not an incremental cost, it is a fixed one). So, the Supervisor Salaries remain $20,000

Net budget (flexible) = $57,000 + $20,000

Net budget (flexible) = $77,000