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Jase Manufacturing Co.'s static budget at 7,500 units of production includes $22,500 for direct labor and...

Jase Manufacturing Co.'s static budget at 7,500 units of production includes $22,500 for direct labor and $2,250 for electric power. Total fixed costs are $38,200. At 10,700 units of production, a flexible budget would show

a.variable costs of $35,310 and $54,499 of fixed costs

b.variable costs of $24,750 and $38,200

c.variable costs of $35,310 and $38,200 of fixed costs

d.variable and fixed costs totaling $62,950

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Answer #1

Answer: c. variable costs of $35,310 and $38,200 of fixed costs

Per Unit $ Static Budget Flexible Budget
7500 units 10700 units
Variable costs:
Direct labor 3.00 22500 32100
Electric power 0.30 2250 3210
Total variable costs 3.30 24750 35310
Fixed costs 38200 38200

Per unit cost:

Direct labor = $22500/7500 = $3

Electric power = $2250/7500 = $0.30

The fixed costs are not affected by the change in volume and hence remain the same for 7500 units and 10700 units assuming volume is within the relevant range.

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