cost formula is expressed as follows: Y = $17PH + $760,000 where PH is defined as process hours. What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost formula?

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Business

Myles Barr

1 October, 00:39

cost formula is expressed as follows: Y = $17PH + $760,000 where PH is defined as process hours. What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost formula?

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Schneider · Answer 1

B. $ 1,984,000 $ 2,112,000

Explanation:

Static budget is a budget that has been prepared for a standard level of output with no tendency to vary irrespective of the level of output.

Therefore, the figure that will appear in static budget is as follows:

Y = $16PH + $640,000 where PH is defined as process hours

PH = 84,000 (Budgeted output)

Y = $16 (84,000) + $640,000

Y = $1,344,000 + $640,000

Y = $1,984,000

That is the figure that will appear in the static budget is $1,984,000

Flexible budget is a budget designed to vary with the level of actual activity.

Therefore the figure that will appear in the flexible budget is as follows:

Y = $16PH + $640,000 where PH is defined as process hours

PH = 92,000 (Budgeted output)

Y = $16 (92,000) + $640,000

Y = $1,472,000 + $640,000

Y = $2,112,000

That is the figure that will appear in the flexible budget is $2,112,000