Schoening Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for January. When the company prepared its planning budget at the beginning of January, it assumed that 40 containers would have been refurbished. However, 38 containers were actually refurbished during January.The amount shown for "Employee salaries and wages" in the planning budget for January would have been closest to:
A) $92,400
B) $94,600
C) $97,579
D) $92,700

Question

Schoening Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for January.  When the company prepared its planning budget at the beginning of January, it assumed that 40 containers would have been refurbished. However, 38 containers were actually refurbished during January.The amount shown for "Employee salaries and wages" in the planning budget for January would have been closest to:
A) $92,400 
B) $94,600 
C) $97,579 
D) $92,700

Quizplus · Accepted Answer

First, we need to calculate the total fixed cost per month:
$94,000 (Property taxes and insurance) + $29,500 (Depreciation) + $20,000 (Office expenses) = $143,500

Next, we need to calculate the variable cost per container refurbished:
$60 (Direct materials) + $25 (Direct labor) + $12 (Variable overhead) = $97

Using this information, we can calculate the total cost for the planning budget:
40 (number of containers) x $97 (variable cost per container) + $143,500 (fixed cost per month) = $147,300

To find the amount shown for "Employee salaries and wages" in the planning budget, we need to subtract the amounts for other expenses:
$147,300 - $20,000 (Office expenses) - $8,900 (Utilities) = $118,400

Therefore, the amount shown for "Employee salaries and wages" in the planning budget for January would have been $94,600 ($118,400 / 40 containers).

Since only 38 containers were actually refurbished during January, we can calculate the actual cost using the same information:
38 (number of containers) x $97 (variable cost per container) + $143,500 (fixed cost per month) = $147,060

To calculate the actual amount for "Employee salaries and wages" in January, we once again subtract the amounts for other expenses:
$147,060 - $20,000 (Office expenses) - $8,010 (Utilities) = $119,050

Therefore, the closest answer to the amount shown for "Employee salaries and wages" in the planning budget for January is B) $94,600.

Schoening Corporation Is a Shipping Container Refurbishment Company That Measures