Teel Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $8,850 per month plus $400 per press run plus $950 per book set-up. The company expected its activity in July to be 204 press runs and 111 book set-ups, but the actual activity was 201 press runs and 110 book set-ups. The actual cost for wages and salaries in July was $193,780.The wages and salaries in the flexible budget for July would be closest to:
A) $193,019
B) $195,900
C) $193,780
D) $193,750

Question

Quizplus · Accepted Answer

The flexible budget for wages and salaries can be calculated using the expected activity levels and the cost formula. The formula given is $8,850 per month (fixed cost) + $400 per press run + $950 per book set-up. For the expected activity in July (204 press runs and 111 book set-ups), the calculation is $8,850 (fixed) + (204 * $400) + (111 * $950) = $8,850 + $81,600 + $105,450 = $195,900. However, the question asks for the flexible budget based on the actual activity, which was 201 press runs and 110 book set-ups. Therefore, the calculation should be $8,850 (fixed) + (201 * $400) + (110 * $950) = $8,850 + $80,400 + $104,500 = $193,750.

Teel Printing Uses Two Measures of Activity, Press Runs and Book