Puppy Company planned to produce 12,000 units.This level of activity required 20 setups at a cost of $22,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.At 10,000 units,what is the flexible budget amount for total setup costs?
A)$7,500
B)$22,000
C)$26,000
D)$29,500

Question

Quizplus · Accepted Answer

Flexible budget amount for total setup costs can be calculated as:
Fixed cost for setups = $22,000 
Variable cost per setup = $500
Flexible budget amount = Fixed cost + (Variable cost per unit x Actual number of units produced)
Flexible budget amount = $22,000 + ($500 x 15)
Flexible budget amount = $22,000 + $7,500
Flexible budget amount = $29,500
Therefore, option D is the correct answer.

Puppy Company Planned to Produce 12,000 Units