Based on Predicted Production of 25,000 Units, FreshCo

question 132

Essay

Based on predicted production of 25,000 units, FreshCo. anticipates $175,000 of fixed costs and
$137,500 of variable costs. What are the flexible budget amounts of total costs for 20,000 and 30,000 units?

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Definitions:

Work In Process

Inventory items that are in the production process but have not yet been completed or transformed into finished goods.

Conversion Costs

These are the combined costs of direct labor and manufacturing overhead that are incurred to convert raw materials into finished goods.

Equivalent Units

A concept used in cost accounting to express the amount of work done on unfinished goods in terms of completed units of output.

Labor

The work performed by humans that is used in the production of goods and services.