An Internet gourmet foods company, Yumminess, will be including Chocolate Attack Brownies (CAB) in their online catalog. CAB will be sold in square tins and captioned with personal greetings. Jordan negotiated a selling price to Yumminess at $10 per tin.

You, using your accounting knowledge, had previously budgeted a cost of $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. Operating expenses are projected to be a fixed annual amount of $80,000.

After looking over the costs for manufacturing overhead and operating expenses, you approximate that 85% of manufacturing overhead and 20% of operating expenses are variable costs.

Jordan wants you to calculate a flexible manufacturing overhead budget assuming an annual level of 230,000 units instead of 200,000.

Questions

4. Taylor asks you if flexible budgets can be calculated monthly. You state, "Of course! Lets create a monthly manufacturing overhead flexible budget for 20,000 units. Please pass me the brownies!" What would be total fixed manufacturing overhead costs for this new level? (Round to the nearest dollar.)

How is the 25000 and 64000 calculated? Thank you

Flexible budget for 20,000 Tins Particulars Budget 200,000 Sales (20000 10) 120,000 Direct material (20000 6 Direct labout (20000 1.50) 30,000 Variable manufacturing overhead Manufacturing overhead (100000*85% 20000 200000) 8,500 Operating expenses (80000 20% 20000 200000) 1,600 Fixed manufacturing overhead 25,000 Fixed operating expenses 64,000 Fixed Manufacturing overhead at new level 20,000 tins is s 89,000