Question

M9-5 (Algo) Preparing a Flexible Budget [LO 9-2] Evanson Company expects to produce 512,000 units of their product during the year. Monthly production is expected to range from 40,000 to 80,000 units. The company has budgeted manufacturing costs per unit to be as follows: Direct materials $7 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 8 9 Prepare a flexible manufacturing budget using 20,000 unit increments. Evanson Company Monthly Flexible Manufacturing Budget Activity level Finished units Variable costs Direct materials Direct labor Overhead Total vari costs Fixed costs Total fixed costs Total costs

Answer 1

Answer

[1]

Activity Level
Finished units	40000	60000	80000
Variable costs [Units x rate]
Direct materials	$280,000	$420,000	$560,000
Direct Labor	$320,000	$480,000	$640,000
Overhead	$360,000	$540,000	$720,000
Total variable costs	$960,000	$1,440,000	$1,920,000
Fixed Costs
Total Fixed Costs [512000 units x $ 3]	$1,536,000	$1,536,000	$1,536,000
Total Costs	$2,496,000	$2,976,000	$3,456,000

[2]

Activity Level
Finished units	40000	60000	80000
Variable costs [Units x rate]
Direct materials	$680,000	$1,020,000	$1,360,000
Direct Labor	$720,000	$1,080,000	$1,440,000
Overhead	$760,000	$1,140,000	$1,520,000
Total variable costs	$2,160,000	$3,240,000	$4,320,000
Fixed Costs
Total Fixed Costs [552000 x $3]	$1,656,000	$1,656,000	$1,656,000
Total Costs	$3,816,000	$4,896,000	$5,976,000