Question

Accounting Problem -
I have the answer to most of this problem,
Just help me with part A (in a red box) & the What If section on the bottom (in a red box).

Problem 1-1 Budgets in Managerial Accounti Santiago's Salsa is in the process of preparing a production cost budget for May. Actual costs in April were: Santiago's Salsa Production Costs 2017 25 Ingredient cost (variable) Labor cost (v Rent (fixed) Depreciation Other Total $20,000 12,000 5,000 6,000 1,000 $44.000 a. Using this information, prepare a budget for May. Assume that production will increase to 30,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing Ingredient cost per unit: Labor cost per unit: Santiago's Salsa Production Costs May 2017 Production Jars of salsa Ingredient cost Labor cost (v Rent 30.000 $24,000 4.400 5,000 6,000 1,000 Other 50 b. Suppose the wage rate is 20.00per hour. How many additional labor hours are needed in May? Labor hours used in Apri Labor hours to be used in May Additional labor hours needed 600 720 120 c. Calculate the actual cost per unit in April and the budgeted cost per unit in May April Actual Total cost Jars of salsa Cost per jar of salsa May Budgeted $50.400 30,000 $44.000 25,000 Consider the following after you have the requirements of P1-1 1. Assume that production will increase to 32,000 jars of salsa during June. By how much will the production cost increase compared to the May budget? Santiago's Salsa Production Costs June 2017 Production Jars of salsa Ingredient cost ( Labor cost (v Rent (fixed) Other Total Increase in cost 2. How does the cost per unit differ for May and June? What caused the cost per unit to decline? Unit cost in May Unit cost in June

Answer 1

Production - Jars of salsa 30,000

Ingredient cost (variable) $24,000

Labor cost (variable) 14,400

Rent (fixed) 5,000

Depreciation (fixed) 6,000

Other (fixed) 1,000

Total $50,400

Part b.1:

yes

additional labor required = 2400/20 = 120

Part b.2:

If no additional workers are engaged firm would incur an increase in profit for some jars and then sudden greater loss..incompetency