Question

At the beginning of the period, the Fabricating Department budgeted direct labor of $136,500 and equipment depreciation of $63,000 for 6,500 hours of production. The department actually completed 8,700 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting.

Answer 1

in flexible Budget the amount of budget changes proportionately to volume or activity.

for 6500 hrs of production direct labour is $136500 and depreciation is $63000 these two will be proportionately increase with increase in number of hrs of production.

for 8700 hrs direct labour will be $136500*8700/6500 =

182700

for 8700 hrs depreciation will be $ 63000*8700/6500 =

84323.08