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Skelton Corporation had planned to produce 50,000 units of product during the first quarter of the current year.The company prepared the following budget on May 1:
During the first quarter,Skelton produced 60,000 units and incurred total manufacturing costs of $184,000.
-The cost-volume relationship used to prepare Skelton's flexible budget for various production levels includes:
A)Fixed cost of $1.17 per unit.
B)Manufacturing overhead costs of $1.43 per unit.
C)Variable costs of $2.07 per unit.
D)Total cost of $3.05 per unit.

Question

[The following information applies to the questions displayed below.]
Skelton Corporation had planned to produce 50,000 units of product during the first quarter of the current year.The company prepared the following budget on May 1:
  During the first quarter,Skelton produced 60,000 units and incurred total manufacturing costs of $184,000.
-The cost-volume relationship used to prepare Skelton's flexible budget for various production levels includes:
A)Fixed cost of $1.17 per unit. 
B)Manufacturing overhead costs of $1.43 per unit. 
C)Variable costs of $2.07 per unit. 
D)Total cost of $3.05 per unit.

Quizplus · Accepted Answer

Variable costs change with the level of production, making option C the correct choice as it directly relates to the cost-volume relationship in a flexible budget. Fixed costs and manufacturing overhead costs per unit would not typically vary with production levels in the context of a flexible budget.

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