Question

Flexible Budget for Varying Levels of Activity

Nashler Company has the following budgeted variable costs per unit produced:

Direct materials	$7.10
Direct labor	1.54
Variable overhead:
Supplies	0.23
Maintenance	0.19
Power	0.17

Budgeted fixed overhead costs per month include supervision of $98,000, depreciation of $77,000, and other overhead of $248,000.

Required:

1. Prepare a flexible budget for all costs of production for the following levels of production: 160,000 units, 170,000 units, and 175,000 units. Round your answers to the nearest cent, if required.

Nashler Company Flexible Budget Range of Range of Range of Variable Production Production Production cost per in Units in Units in Units unit 160,000 170,000 175,000 $ Production costs: Variable: Direct materials $ Direct labor Variable overhead: Supplies Maintenance Power Total variable costs mini im i 10 ini inci Fixed overhead: Supervision Depreciation Other overhead Total fixed costs Total production costs

2. What is the per-unit total product cost for each of the production levels from Requirement 1? (Round each unit cost to the nearest cent.)

Answer 1

Solution:
1	Nashler Company
	Flexible Budget
		Variable Cost per unit	Range of Production in Units-	Range of Production in Units-	Range of Production in Units-
			160000	170000	175000
	Production Cost :
	Variable:
	Direct Materials	$          7.10	$         1,136,000	$             1,207,000	$         1,242,500
	Direct Labour	$          1.54	$            246,400	$                261,800	$            269,500
	Variable Overheads:
	Supplies	$          0.23	$              36,800	$                  39,100	$              40,250
	Maintenance	$          0.19	$              30,400	$                  32,300	$              33,250
	Power	$          0.17	$              27,200	$                  28,900	$              29,750
	Total variable costs	$          9.23	$         1,476,800	$             1,569,100	$         1,615,250
	Fixed Overhead:
	Supervision		$              98,000	$                  98,000	$              98,000
	Depreciation		$              77,000	$                  77,000	$              77,000
	Other Overhead		$            248,000	$                248,000	$            248,000
	Total Fixed costs		$       423,000.00	$          423,000.00	$       423,000.00
	Total Production Cost		$         1,899,800	$             1,992,100	$         2,038,250
2	Units	Production Cost	Production Cost- Per Unit
	160000	$ 1,899,800	$                11.87
	170000	$ 1,992,100	$                11.72
	175000	$ 2,038,250	$                11.65
3	If Cost of Maintenance rose to $0.22 per unit:
	Nashler Company
	Flexible Budget
		Variable Cost per unit	Range of Production in Units-	Range of Production in Units-	Range of Production in Units-
			160000	170000	175000
	Production Cost :
	Variable:
	Direct Materials	$          7.10	$         1,136,000	$             1,207,000	$         1,242,500
	Direct Labour	$          1.54	$            246,400	$                261,800	$            269,500
	Variable Overheads:
	Supplies	$          0.23	$              36,800	$                  39,100	$              40,250
	Maintenance	$          0.22	$              35,200	$                  37,400	$              38,500
	Power	$          0.17	$              27,200	$                  28,900	$              29,750
	Total variable costs	$          9.26	$         1,481,600	$             1,574,200	$         1,620,500
	Fixed Overhead:
	Supervision		$              98,000	$                  98,000	$              98,000
	Depreciation		$              77,000	$                  77,000	$              77,000
	Other Overhead		$            248,000	$                248,000	$            248,000
	Total Fixed costs		$       423,000.00	$          423,000.00	$       423,000.00
	Total Production Cost		$         1,904,600	$             1,997,200	$         2,043,500
	Units	Production Cost	Production Cost- Per Unit (New)	Production Cost- Per Unit (Old)	Increase in per unit product cost
	160000	$ 1,904,600	$                11.90	$                    11.87	$                   0.03
	170000	$ 1,997,200	$                11.75	$                    11.72	$                   0.03
	175000	$ 2,043,500	$                11.68	$                    11.65	$                   0.03