Homework Answers
| 1 | Flexible Budget | ||||
| Flexible Budget | |||||
| Variable Cost per unit | 3500 units | 4000 units | 4500 units | ||
| a | b =a*3500 | c =a*4000 | d =a*4500 | ||
| Direct materials (2*7) | $ 14.00 | $ 49,000 | $ 56,000 | $ 63,000 | |
| Direct labor (1.50*18) | $ 27.00 | $ 94,500 | $ 108,000 | $ 121,500 | |
| Variable overhead (1.50*1.20) | $ 1.80 | $ 6,300 | $ 7,200 | $ 8,100 | |
| Fixed overhead | $ 6,800 | $ 6,800 | $ 6,800 | ||
| Total | $ 156,600 | $ 178,000 | $ 199,400 | ||
| 2 | Unit Cost | ||||
| Unit Cost | |||||
| 3500 units | 4000 units | 4500 units | |||
| a | Total Cost | $ 156,600 | $ 178,000 | $ 199,400 | |
| b | Number of units | 3,500 | 4,000 | 4,500 | |
| c | Unit Cost (a/b) | $ 44.74 | $ 44.50 | $ 44.31 | |
|
The Cost per unit decreases as the number of units produced increases because the fixed cost is spread over a greater number of units. |
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