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Evanson Company expects to produce 512,000 units of their product during the year. Monthly production is expected to range from 40,000 to 80,000 units. The company has budgeted manufacturing costs per unit to be as follows: Direct materials $ 7 Direct labor 8 Variable manufacturing overhead 9 Fixed manufacturing overhead 3 Prepare a flexible manufacturing budget using 20,000 unit increments.

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Answer:

Total Cost using 20,000 increments is as follows:

40,000 units - $1,080,000 (Total Cost)

60,000 units - $1,620,000 (Total Cost)

80,000 units - $2,160,000 (Total Cost)

Explanation:

Monthly Flexible Manufacturing Budgets

Units Produced                       40,000         60,000        80,000

Direct Material (7/unit)           280,000       420,000      560,000

Direct Labor (8/unit)               320,000       480,000      640,000

Variable Overhead (9/unit)    360,000       540,000      720,000

Total Variable Cost                960,000     1,440,000     1,920,000

Fixed Overhead (3/unit)          120,000        180,000       240,000

Total Cost                              $1,080,000   $1,620,000  $2,160,000

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