Bob and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show:
A) the same cost structure in total
B) direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $30,000
C) total variable costs of $148,000
D) direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $25,000

Question

Quizplus · Accepted Answer

In a flexible budget, variable costs change with the level of production, while fixed costs remain constant. Direct materials, direct labor, and utilities are variable costs and increase proportionally with production. Supervisor salaries are fixed and remain at $25,000.

Bob and Sons' Static Budget for 10,000 Units of Production