Peppy Company planned to produce 12,000 units.This level of activities required 20 set-ups at a cost of $22,000 plus $500 per set-up.Actual sales were 10,000 units, requiring 15 set-ups and 12,000 machine hours.Actual set-up cost was $26,000._____ is the flexible budget amount for set-ups.
A)$26,000
B)$22,000
C)$29,500
D)$7,500

Question

Quizplus · Accepted Answer

To find the flexible budget amount for set-ups, we need to use the formula: Flexible Budget = Budgeted Cost + (Actual Quantity - Budgeted Quantity) x Budgeted Cost per Unit.

Budgeted Quantity of set-ups = 20
Budgeted Cost per Set-up = $22,000 + $500 = $22,500

Flexible Budget for set-ups = $22,500 x (15-20) + $22,000
= $29,500

Therefore, the best choice is (C) $29,500.

Peppy Company Planned to Produce 12,000 Units