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 25000-unit level of activity.