Flexible budgeting-manufacturing costs. As a result of studying past cost behavior and adjusting for expected price increases in the future, Nicholson Company estimates that its manufacturing costs will be as follows:
Direct Materials....................................................................................................................$10.00 per Unit
Direct Labor .......................................................................................................................$6.00 per Unit
Manufacturing Overhead:
Variable .............................................................................................................................$3.00 per Unit
Fixed .................................................................................................................................$100,000 per Period
Nicholson uses these estimates for planning and control purposes.
a. Nicholson expects to produce 20,000 units during the next period. Prepare a schedule of the expected manufacturing costs.
b. Suppose that Nicholson produces only 16,000 units during the next period. Prepare a flexible budget of manufacturing costs for the 16,000-unit level of activity.
c. Suppose that Nicholson produces 25,000 units during the next period. Prepare a flexible budget of manufacturing costs for the 25,000-unit level of activity.