Zariz Ltd budgeted product costs for the third quarter of 2019 were based on an expected volume of 2,000 units. The budgeted unit costs appear below: $\begin{array}{lr}
\text { Direct material } & \$ 1.50 \
\text { Direct labor } & 2.25 \
\text { Variable overhead } & 4.25 \
\text { Fixed overhead } & \underline{3.00} \
\quad \text { Total } & \underline{\$ 11.00} \

\end{array}$

If Zariz Ltd had a budgeted volume of 2,500 units, the total budgeted product cost for the third quarter of 2019 would have been
A) $26,000
B) $16,000
C) $20,500
D) None of the above

Question

Zariz Ltd budgeted product costs for the third quarter of 2019 were based on an expected volume of 2,000 units. The budgeted unit costs appear below: $\begin{array}{lr}
\text { Direct material } & \$ 1.50 \
\text { Direct labor } & 2.25 \
\text { Variable overhead } & 4.25 \
\text { Fixed overhead } & \underline{3.00} \
\quad \text { Total } & \underline{\$ 11.00} \

\end{array}$

If Zariz Ltd had a budgeted volume of 2,500 units, the total budgeted product cost for the third quarter of 2019 would have been
A) $26,000
B) $16,000
C) $20,500
D) None of the above

Quizplus · Accepted Answer

The total budgeted product cost is equal to the budgeted unit cost multiplied by the budgeted volume. If the budgeted volume increases from 2,000 units to 2,500 units, the total budgeted product cost will increase from $22,000 (2,000 units x $11.00 per unit) to $27,500 (2,500 units x $11.00 per unit).

Zariz Ltd Budgeted Product Costs for the Third Quarter of 2019