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 total expenses in the flexible budget for January would have been closest to:
A) $160,500
B) $160,200
C) $163,800
D) $168,947

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 total expenses in the flexible budget for January would have been closest to:
A) $160,500 
B) $160,200 
C) $163,800 
D) $168,947

Quizplus · Accepted Answer

First, we need to calculate the variable cost per container: 
Variable cost per container = (Actual variable cost - Fixed cost) / Actual output 
= ($150,000 - $300,000) / 38 
= $2,631.58

Next, we can calculate the flexible budget for actual output (38 containers): 
Fixed cost = $300,000 
Variable cost = $2,631.58 x 38 = $100,000.04 
Flexible budget = Fixed cost + Variable cost 
= $300,000 + $100,000.04 
= $400,000.04

Therefore, the total expenses in the flexible budget for January would have been closest to $160,200 (Option B) as the actual number of containers refurbished is less than the budgeted amount.

Schoening Corporation Is a Shipping Container Refurbishment Company That Measures