Budgeted amounts for the year:

Materials 2 leather strips @ $7.00

Labor 1.5 hr @ $18.00

Variable overhead (VOH) 1.5 hr @ $1.20

Fixed overhead (FOH) $6,800

Required:

1.

Prepare a flexible budget for 3,500, 4,000, and 4,500 units.

2.

CONCEPTUAL CONNECTION (a) Calculate the unit cost at 3,500, 4,000, and 4,500 units. (b) What happens to unit cost as the number of units produced increases?

1. Prepare a flexible budget for 3,500, 4,000, and 4,500 units. (Note: Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.)

1	cost formula	3500 units	4000 units	4500 units
2	materials
3	labor
4	VOH
5	FOH
6	Total

2(a) Calculate the unit cost at 3,500, 4,000, and 4,500 units. (Note: Round unit costs to the nearest cent.)

	Unit cost at 3,500 units equals .
	Unit cost at 4,000 units equals .
	Unit cost at 34,500 units equals . 2(b) What happens to unit cost as the number of units produced increases? The cost per unit _____ as the number of units produced increases because _____ is spread over a greater number of units.

(down. up, or unchaged)? ^^