Bhue Company has two production departments Fabricating and

Bhue Company has two production departments, Fabricating and Assembling. At a department managers meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following. 1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the vertical axis at $46,000 in the Fabricating Department and $38,000 in the Assembling Department. 2. At normal capacity of 49,700 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $165,280 in the Fabricating Department, and $132,430 in the Assembling Department. State the total budgeted cost formula for each department. (Round cost per direct labor hour to 2 decimal places, e.g. 1.25.) + total Fixed Costs 46000 per direct labor hour Assembling Departimen94,430 Veriable Coststotal Fixed Conts of38,000 per diret bbor hour + total Fixed Costs . 38,000 per direct labor hour Compute the total budgeted cost for each department, assuming actual direct labor hours worked were 52,700 and 46,700, in the Fabricating Department Assembling Department The total budgeted cost Click if you would like to Show Work for this question: Open Sho Work Version 424.7.7 s per ?? fg 144 fo 3 4 5

Solution

Solution 1:

At zero direct labor hours, total budgeted cost of :

Fabrication = $46,000

Assembly = $38,000

It means

Fixed cost in fabrication = $46,000

Fixed cost in assembly = $38,000

Let variable cost per hour is X for fabrication and Y for assembly

Total budgeted cost at 49700 direct labor hours:

Fabrication = Variable cost + Fixed costs = 49700X + $46,000 = $165,280

X = $2.40 per hour

Assembly = Variable cost + Fixed costs = 49700Y + $38,000 = $132,430

Y = $1.90 per hour

Budgeted cost formula for each department:

Fabrication = $46,000 (Fixed cost) + $2.40 * DL hours (Variable cost per DL hour)

Assembly = $38,000 (Fixed cost) + $1.90 * DL hours (Variable cost per DL hour)

Solution 2:

Budgeted cost for each department:

Fabricating = $46,000 + $2.40 * 52700 = $172,480

Assembly = $38,000 + $1.90 * 46700 = $126,730