Question

A static budget, based upon production of 10,000 units, showed an estimated direct labor budget of $30,000 and depreciation budget of $20,000. Direct labor costs are fully variable. The actual direct labor and depreciation costs were $28,000 and $19,000 for 8,000 units.

Which total amount should be shown in the flexible budget for direct labor and depreciation costs?

Answer 1

Flexible Budget Cost for Direct Labor =($30000 /10000 units) x 8000 actual units = $ 24,000

Flexible Budget Cost for Depreciation = Fixed cost = Same as Budgeted = $ 20,000

Total Flexible Budget cost = 24000 + 20000 = $ 44,000