At the beginning of the period the Cutting Department budget

At the beginning of the period, the Cutting Department budgeted direct labor of $140,000, direct materials of $167,000 and fixed factory overhead of $14,700 for 7,000 hours of production. The department actually completed 11,100 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting? Round your final answer to the nearest dollar. Do not round interim calculations.

a)$330,310

b)$501,514

c)$321,700

d)$510,124

Solution

Total variable cost=(Direct labor+Direct materials)

=(140,000+167000)=$307000

Hence variable cost/unit=($307000/7000)=$43.85714286

Hence total variable cost at 11100 units=(43.85714286*11100)=$486814.29(Approx)

Total fixed cost=$14700

Hence total cost=(486814.29+$14700)=$501514(Approx).

NOTE:Total fixed cost and variable cost/unit do not change with change in units.