The Budget and Actual Cost Statements for the Production Department

question 3

Multiple Choice

The budget and actual cost statements for the production department for the latest period were as follows. 11ec37eb_8baf_8298_97b9_bbe728f13da1__00 Notes. The 10% increase in production was required to meet unexpected additional sales demand. The production manager is responsible for negotiating the price of materials with suppliers. The normal working time is 900 hours per period. Any overtime worked above these 900 hours is paid at a premium of 50%. In preparing the flexible budget for the latest period, which TWO of the following statements are correct? (Choose two.)

• A) The fixed costs should be flexed to $40,000 + 10% = $44,000.
• B) The material quantity should be flexed to 60,000 + 10% = 66,000 kg.
• C) The basic pay hours should not be flexed; they should remain at 1,000 hours.
• D) The overtime hours should be flexed to (1,000 + 10%) - 900 = 200 hours.
• E) The material price should be flexed to the actual figure of $3.10 per kg.

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Definitions:

Supply Function

A mathematical representation showing the amount of goods that producers are willing and able to sell at different prices, graphically depicted as a curve.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, primarily to keep it affordable for consumers.

Price

The anticipated financial cost, needed, or offered for a particular item or service.

Equivalent Variation

A measure of economic welfare change, quantifying the amount of money needed to bring a consumer to a utility level before a price change.