Campbell, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels.
Campbell had the following budgeted data:
$\begin{array}{llr}
\text { Budgeted variable costs per unit } &\
\text {Direct materials } &\$7.00\
\text {Direct labour } &10.00\
\text { Supplies } &1.00\
\text { Indirect labour } &0.50\
\text { Power } &0.05\
\end{array}$

$\begin{array}{l}
\text { Budgeted fixed overhead for } 2011 \
\text { Supervision } & \$ 4,000 \
\text { Depreciation } & 3,000 \
\text { Rent } & 2000
\end{array}$
-Refer to the figure.What is the difference in total budgeted costs between the volume range of 4,000 and 5,000 units?
A)$0
B)$1,000
C)$9,000
D)$18,550

Question

Campbell, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels.
Campbell had the following budgeted data:
$\begin{array}{llr}
  \text { Budgeted variable costs per unit  } &\
 \text {Direct materials  } &\$7.00\
 \text {Direct labour  } &10.00\
 \text { Supplies } &1.00\
 \text { Indirect labour } &0.50\
 \text { Power } &0.05\
\end{array}$

$\begin{array}{l}
\text { Budgeted fixed overhead for } 2011 \
\text { Supervision } & \$ 4,000 \
\text { Depreciation } & 3,000 \
\text { Rent } & 2000
\end{array}$
-Refer to the figure.What is the difference in total budgeted costs between the volume range of 4,000 and 5,000 units?
A)$0
B)$1,000
C)$9,000
D)$18,550

Quizplus · Accepted Answer

The difference in total budgeted costs between the volume range of 4,000 and 5,000 units includes the variable costs for the additional 1,000 units and no change in fixed costs. The variable costs per unit are $7.00 (Direct materials) + $10.00 (Direct labor) + $1.00 (Supplies) + $0.50 (Indirect labor) + $0.05 (Power) = $18.55. For 1,000 additional units, the total variable cost increase is 1,000 units * $18.55 = $18,550. Fixed costs (Supervision, Depreciation, Rent) remain unchanged regardless of the volume, so the difference in total budgeted costs is entirely due to the variable costs for the additional units.

Campbell, Inc -Refer to the Figure