Question

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 $51,000 in the Fabricating Department and $43,000 in the Assembling Department.
2.		At normal capacity of 45,900 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $129,030 in the Fabricating Department, and $102,670 in the Assembling Department.

(a)

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State the total budgeted cost formula for each department. (Round cost per direct labor hour to 2 decimal places, e.g. 1.25.)

Fabricating Department	=	$   total                                                                       Fixed CostsVariable Costs +                                                                       Fixed CostsVariable Costs of $   per direct labor hour
Assembling Department	=	$   total                                                                       Fixed CostsVariable Costs +                                                                       Fixed CostsVariable Costs of $   per direct labor hour

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(b)

Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 48,900 and 42,900, in the Fabricating and Assembling Departments, respectively.

		Fabricating Department		Assembling Department
The total budgeted cost		$		$

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Answer 1

a
Variable cost :
Fabricating Department	1.70	=(129030-51000)/45900
Assembling Department	1.30	=(102670-43000)/45900

Fabricating Department = $ 51000 Fixed Costs + Variable Costs of $ 1.70 per direct labor hour

Assembling Department = $ 43000 Fixed Costs + Variable Costs of $ 1.30 per direct labor hour

b
The total budgeted cost :
Fabricating Department	134130	=51000+(48900*1.70)
Assembling Department	98770	=43000+(42900*1.30)