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17 February, 12:05

BE10.4 (LO 2), AP Gundy Company expects to produce 1,200,000 units of Product XX in 2020. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments. Prepare a flexible budget for variable costs.

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  1. 17 February, 12:44
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    80,000 units 100,000 units 120,000 units

    Variable cost $1,520,000 $1,900,000 $2,280,000

    Total costs $1,820,000 $2,200,000 $2,580,000

    Explanation:

    Activity Level

    Finished Units 80,000 units 100,000 units 120,000 units

    Variable Costs:

    Direct Materials (Units * $5) $400,000 $500,000 $600,000

    Direct Labor (Units * $6) $480,000 $600,000 $720,000

    Overhead (Units * $8) $640,000 $800,000 $960,000

    Total Variable Costs $1,520,000 $1,900,000 $2,280,000

    Fixed Costs

    Depreciation $200,000 $200,000 $200,000

    Supervision $100,000 $100,000 $100,000

    Total Fixed Costs $300,000 $300,000 $300,000

    So, Total costs $1,820,000 $2,200,000 $2,580,000

    (Variable + Fixed)
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