Question
PROBLEM 1-1. Budgets in Managerial Accounting [LO 2, 5] Santiago's Salsa is in the process of preparing a production cost budget for May. Actual costs
PROBLEM 1-1. Budgets in Managerial Accounting [LO 2, 5] Santiago's Salsa
is in the process of preparing a production cost budget for May. Actual costs in
April were:
| INGREDIENT COST (VARIABLE) | 20,00.00 |
| LABOR COST (VARIABLE) | 12,000.00 |
| RENT (FIXED) | 5,000.00 |
| DEPRECIATION (FIXED) | 6,000.00 |
| OTHER (FIXED) | 1,000.00 |
Required
1. Using this information, prepare a budget for May. Assume that production
will increase to 30,000 jars of salsa, reflecting an anticipated sales increase related
to a new marketing campaign.
2. Does the budget suggest that additional workers are needed? Suppose the
wage rate is $20 per hour. How many additional labor hours are needed in
May? What would happen if management did not anticipate the need for
additional labor in May?
3. Calculate the actual cost per unit in April and the budgeted cost per unit in
May. Explain why the cost per unit is expected to decrease.
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Financial Accounting
Authors: David Spiceland, Wayne M. Thomas, Don Herrmann
5th edition
1259914895, 978-1259914898
