Flexible Budgets Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity. The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity. Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor. Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production. To Determine: Flexible Budget Report for 6,000, 7,000 and 8,000 units of sales.

Question

Want to see the full answer?

Answer 1

Question

Chapter 23, Problem 2E

To determine

Introduction:

Flexible Budgets

Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity.

The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity.

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production.

To Determine:

Flexible Budget Report for 6,000, 7,000 and 8,000 units of sales.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Job 786 was one of the many jobs started and completed during the year. The job required $8,400 in direct materials and 35 hours of direct labor time at a total direct labor cost of $9,300. If the job contained five units and the company billed at 70% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?

What is the company's gross profit?

MOH Cost: Top Dog Company has a budget with sales of 7,500 units and $3,400,000. Variable costs are budgeted at $1,850,000, and fixed overhead is budgeted at $970,000. What is the budgeted manufacturing cost per unit?