Question

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 2017 24,000 Production Jars of Salsa Ingredient cost (variable) $19,200 Labor cost (variable) 11,520 Rent (fixed) 5,000 Depreciation (fixed) 6,000 Other (fixed) 1,000    Total $42,720

Using this information, prepare a budget for May. Assume that production will increase to 28,800 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign. Santiago's Salsa Budgeted Production Costs May 2017 28,800 Production Jars of Salsa Ingredient cost $ Labor cost Rent Depreciation Other Total $

Suppose the wage rate is $12 per hour. How many additional labor hours are needed in May? (Round answer to 0 decimal places, e.g. 5,275.)

Additional labour hours

Calculate the actual cost per unit in April and the budgeted cost per unit in May. (Round answers to 2 decimal places, e.g. 15.20.)

		Cost per unit
Actual cost per unit in April		$
Budgeted cost per unit in May		$

Answer 1

Production	calculation	cost
Ingredient cost	=19200/24000*28800	23040
Labor cost	=11520/24000*28800	13824
Rent	5000	5000
Other	1000	1000
Depreciation	6000	6000
Total		48864

Budgeted cost per unit = total cost/no. of units of production

(In may) =48864/28800=$1.7 per unit

Actual cost per unit in April=total cost / no. of units produced

=42720/24000=$1.8 per unit

Actual labor hrs in April =labor cost/cost per hr

=11520/12= 960 hrs

Labor hrs in may =budgeted labor cost/cost per hr

=1152hrs

Additinal required hrs =labor hrs in may - labor hrs in April

=1152-960.

=192 hrs