Dealer Enterprises (DE) anticipated that 100,000 process hours would be worked during an upcoming accounting period when, in fact, 108,000 hours were actually worked. One of the company's cost functions is expressed as follows: Y = $18PH + $800,000 where PH is defined as process hours What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?
Dealer Enterprises (DE) anticipated that 100,000 process hours would be worked during an upcoming accounting period when, in fact, 108,000 hours were actually worked. One of the company's cost functions is expressed as follows: Y = $18PH + $800,000 where PH is defined as process hours What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dealer Enterprises (DE) anticipated that 100,000 process hours would be worked during an upcoming accounting period when, in fact, 108,000 hours were actually worked. One of the company's cost functions is expressed as follows:
Y = $18PH + $800,000 where PH is defined as process hours
What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?
Expert Solution
Step 1: Introduce to flexible budget and planning budget
Flexible budget is calculated by multiplying variable amount per unit of activity by actual activity level. Static budget is calculated by multiplying variable amount per unit of activity by planned activity level.
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