FLEXIBLE BUDGET FOR VARIOUS LEVELS OF PRODUCTION Budgeted amounts for the year:

Materials 2 leather strips @ $3.00 Labor 0.5 hr. @ $12.00 Variable overhead 0.5 hr. @ $1.00 Fixed overhead $4,500 Required:

. Prepare a flexible budget for 2,000, 3,000, and 4,000 units.

. Calculate the unit cost at 2,000, 3,000, and 4,000 units. What happens to unit cost as the number of units produced increases?

Exercise