Cameron Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $20,000. At 8,000 units of production, a flexible budget would show:

Question

Quizplus · Accepted Answer

For a flexible budget, we need to calculate the variable costs and fixed costs at the 8,000 units of production level.

Variable costs per unit = Variable electric power + Direct labor = $5,000 + $40,000/5,000 units = $13 per unit
Variable costs at 8,000 units of production = $13 x 8,000 units = $104,000

Fixed costs remain the same at $20,000.

Therefore, the total flexible budget at 8,000 units of production would be:
Variable costs of $104,000 + fixed costs of $20,000 = $124,000

Only option C provides the correct total variable and fixed costs for the flexible budget.