McCabe Manufacturing Co.'s static budget at 8,000 units of production includes $40,000 for direct labor and $4,000 for electric power.Total fixed costs are $23,000.At 9,000 units of production,a flexible budget would show:
A)variable costs of $49,500 and $25,875 of fixed costs.
B)variable costs of $44,000 and $23,000 of fixed costs.
C)variable costs of $49,500 and $23,000 of fixed costs.
D)variable costs of $44,000 and $25,875 of fixed costs.

Question

Quizplus · Accepted Answer

To calculate the flexible budget for 9,000 units of production, we need to use the same cost per unit as the static budget, but adjust for the higher level of production.

Variable cost per unit = ($40,000 + $4,000) / 8,000 units = $5 per unit
Total variable cost for 9,000 units = $5 per unit * 9,000 units = $45,000

Total flexible budget = Total fixed costs + Total variable costs
Total flexible budget = $23,000 + $45,000 = $68,000

Therefore, the flexible budget for 9,000 units of production would show variable costs of $49,500 ($5 per unit * 9,900 units) and fixed costs of $23,000, which corresponds to choice C.