Flexible Budget for Various Levels of Production Budgeted amounts for the year: Materials Labor VOH FOH 2 leather strips @ $7.00 1.5 hr. @ $18.00 1.5 hr. @ $1.20 $6,800 Required: 1. Prepare a flexible budget for 3,500, 4,000, and 4,500 units. Flexible Budget Variable Cost per Unit 3,500 units 4,000 units 4,500 units $ $ Direct materials 14 Direct labor 27 49,000 94,500 56,000 108,000 63,000 121,500 Variable 1.8 7,200 X 8,100 X overhead Fixed overhead Total 6,800 156,600 6,800 178,000 199,400 2. CONCEPTUAL CONNECTION Calculate the unit cost at 3,500, 4,000, and 4,500 units. (Note: Round unit costs to the nearest cent.) Unit cost at 3,500 units $ 44.74 Unit cost at 4,000 units $ 44.5 Unit cost at 4,500 units $ 44.31 What happens to unit cost as the number of units produced increases? The cost per unit goes down as the number of units produced increases because fixed cost is spread over a greater number of units.