Sugarland Company is using new cost drivers for its accounting system.One driver material handling for unit variable costs and number of inspections for a pool of batch-level costs.Data for the past year follow. What is the total ﬂexible budget dollar amount for the actual level of material handling and actual number of inspections?
A)$1,017,720.
B)$1,031,500.
C)$1,139,220.
D)$1,161,060.
E)None of the answers is correct.

Question

Sugarland Company is using new cost drivers for its accounting system.One driver material handling for unit variable costs and number of inspections for a pool of batch-level costs.Data for the past year follow.  What is the total ﬂexible budget dollar amount for the actual level of material handling and actual number of inspections?
A)$1,017,720. 
B)$1,031,500. 
C)$1,139,220. 
D)$1,161,060. 
E)None of the answers is correct.

Quizplus · Accepted Answer

First, we need to calculate the cost per unit for material handling which is $1,040,000 ÷ 260,000 units = $4 per unit.
Next, we need to calculate the cost per batch for inspections which is $120,000 ÷ 1,500 batches = $80 per batch.
Now we can use the flexible budget formula:
Flexible Budget = (Cost per unit of material handling x Actual units of material handling) + (Cost per batch of inspections x Actual number of batches)
Flexible Budget = ($4 x 265,000) + ($80 x 1,450)
Flexible Budget = $1,060,000 + $116,000
Flexible Budget = $1,176,000
Therefore, the best choice is C) $1,139,220.

Sugarland Company Is Using New Cost Drivers for Its Accounting