Santiago s Salsa is in the process of preparing a production
Santiago’s Salsa is in the process of preparing a production cost budget for May. Actual costs in April were:
Santiago’s Salsa
Production Costs
April 2011
25,000
Production Jars of Salsa
Ingredient cost (variable)................ \$20,000
Labor cost (variable)........ 12,000
Rent (ﬁxed)............ 5,000
Depreciation (ﬁxed)........ 6,000
Other (ﬁxed).......... 1,000
Total.............. \$44,000

Required
a. 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.
b. 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?
c. 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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Pure and applied mathematics
Bs Procurement and Supplychain