Gundy Company expects to produce 1,200,000 units of Product XX in 2017. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments.

[tex]\left[\begin{array}{ccccc}-&units \: cost&V80,000&V100,000&V120,000\\DM&5&400,000&500,000&600,000\\DL&6&480,000&600,000&720,000\\Overhead&8&640,000&800,000&960,000\\Total Variable&19&1,520,000&1,900,000&2,280,000\\Depreciation&200,000&200,000&200,000&200,000\\Supervision&100,000&100,000&100,000&100,000\\Total Fixed&300,000&300,000&300,000&300,000\\Total Overhead&&1,820,000&2,200,000&2,580,000\\\end{array}\right][/tex]

Explanation:

We multiply the variable cost by each volume of production

for example direct materials 5 x 80,000 = 400,000

5 x 100,000 = 500,000

5 x 120,000 = 600,000

Then for the fixed cost:

notice the company expect to produce 1,200,000 units.

If fixed depreciation is $2 per unit then

1,200,000 x $2 = 2,400,000 depreciation per year.

we then divide this value by 12 to get the monthly fixed depreciation

2,400,000/12 = 200,000

Same procedure goes for supervision

1,200,000 units x $1 per unit = 1,200,000 per year

1,200,000/12 = 100,000 per month

Finally we add both, fixed and variable to et total overhead for the relevant range.