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At the 12,000 unit level a flexible budget shows packing materials of $36,000, direct labor of $18,000, variable utilities of $6,000 and fixed costs of $70,000. What are total budgeted costs?
A$130,000
B$120,000
C$124,000
D$136,000
Answer & Solution
Correct answer: A. $130,000
1. Variable costs at 12,000 units are $36,000 plus $18,000 plus $6,000, which is $60,000.
2. Fixed costs of $70,000 do not move with the activity level.
3. Total budgeted costs are $60,000 plus $70,000, which is $130,000.
4. $120,000 is the total at the 10,000 unit level, where variable costs are only $50,000.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.3 Flexible Budget_
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