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Venetian Fabricating

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Venetian 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 $50,000 in the Fabricating Department and $40,000 in the Assembling
Department.

2. At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted
cost line intersects the vertical axis at $150,000 in the Fabricating Department, and
$120,000 in the Assembling Department.

Instructions
(a) State the total budgeted cost formula for each department.
(b) Compute the total budgeted cost for each department, assuming actual direct labor
hours worked were 53,000 and 47,000, in the Fabricating and Assembling Departments,
respectively.

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