Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets

Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:










Steel per filing cabinet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 pounds
Direct labor per filing cabinet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 minutes
Supervisor salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,000 per month
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,000 per month
Direct labor rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21 per hour
Steel cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.40 per pound


Prepare a flexible budget for 12,000, 15,000, and 18,000 filing cabinets for the month of August 2014, similar to Exhibit 5, assuming that inventories are not significant.


Answer:























STEELCASE INC.—FABRICATION DEPARTMENT
Flexible Production Budget
August 2014
(assumed data)
Units of production 12,000 15,000 18,000
Variable cost:
Direct labor $ 84,000 1 $105,000 2 $126,000 3
Direct materials 264,000 4 330,000 5 396,000 6
Total variable cost $348,000 $435,000 $522,000
Fixed cost:
Supervisor salaries $180,000 $180,000 $180,000
Depreciation 28,000 28,000 28,000
Total fixed cost $208,000 $208,000 $208,000
Total department cost $556,000 $643,000 $730,000
1 12,000 × 20/60 min. × $21
2 15,000 × 20/60 min. × $21
3 18,000 × 20/60 min. × $21
4 12,000 × 55 lbs. × $0.40
5 15,000 × 55 lbs. × $0.40
6 18,000 × 55 lbs. × $0.40