Nyt Garments Co.'s static budget at 10,000 units of production includes $30,000 for direct material and $5,000 for electric power.Total fixed costs are $31,000.At 12,000 units of production, a flexible budget would show:
A) variable costs of $40,000 and $35,000 of fixed costs.
B) variable costs of $44,000 and $23,000 of fixed costs.
C) variable costs of $42,000 and $31,000 of fixed costs.
D) variable costs of $41,000 and $30,000 of fixed costs.

Question

Quizplus · Accepted Answer

To calculate the flexible budget at 12,000 units of production, we first need to calculate the variable costs per unit.

Variable costs per unit = (Total variable costs - Total fixed costs) / Units produced
Variable costs per unit = ($30,000 + 0 - $0 - $31,000) / 10,000
Variable costs per unit = $1

Using the variable cost per unit, we can calculate the total variable costs at 12,000 units of production:

Total variable costs at 12,000 units = Variable cost per unit x Units produced
Total variable costs at 12,000 units = $1 x 12,000
Total variable costs at 12,000 units = $12,000

Now we can calculate the flexible budget at 12,000 units:

Flexible budget at 12,000 units = Total fixed costs + Total variable costs
Flexible budget at 12,000 units = $31,000 + $12,000
Flexible budget at 12,000 units = $43,000

Therefore, the answer is C) variable costs of $42,000 and $31,000 of fixed costs.