Microgen Company static budget for 12,000 units of production includes $48,000 for direct materials, $36,000 for direct labor, utilities of $6,000, and supervisor salaries of $18,000.A flexible budget for 14,000 units of production would show:
A) the same cost structure in total.
B) direct materials of $56,000, direct labor of $42,000, utilities of $7,000, and supervisor salaries of $18,000.
C) total variable costs of $126,800.
D) direct materials of $50,000, direct labor of $37,500, utilities of $6,250, and supervisor salaries of $21,000.

Question

Quizplus · Accepted Answer

The flexible budget adjusts costs based on changes in the level of activity or volume of production. Direct materials, direct labor, and utilities are variable costs that change with the level of production, while supervisor salaries are fixed costs that remain constant regardless of the level of production. The costs for direct materials, direct labor, and utilities are calculated by multiplying the per unit cost at the original level of production by the new level of production (14,000 units). Supervisor salaries remain unchanged.

Microgen Company Static Budget for 12,000 Units of Production Includes