Question

Exercise 23-12 c (Essay) Venetian Company has two production departments, Fabricating and Assembling. At a department managers’ meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following. 1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $50,000 in the Fabricating Department and $40,000 in the Assembling Department. 2. At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $150,000 in the Fabricating Department, and $120,000 in the Assembling Department.

Prepare the flexible budget graph for the Fabricating Department, assuming the maximum direct labor hours in the relevant range is 100,000. Use increments of 10,000 direct labor hours on the horizontal axis and increments of $50,000 on the vertical axis.

Answer 1

Fabricating Department Flesåble Budget Graph Cost (in thousands Total Budgeted Cast » Fixed Cast 0 10 20 30 40 50 60 70 80 90 100 Direct labowe cost (in thousands

The graph shows Fabricating Department's Flexible Budget Graph

At 0 direct labour hours Fixed Cost and Total Budgeting Cost is $50,000.

At 50,000 direct labour hours Total Budgeting Cost is $150,000.