Dealer Enterprises (DE) anticipated that 84,000 process hours would be worked du

Question

Dealer Enterprises (DE) anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as follows:

Y = $16PH + $640,000 where PH is defined as process hours

What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?

Static Flexible A. $ 1,984,000 $ 1,984,000 B. $ 1,984,000 $ 2,112,000 C. $ 2,112,000 $ 1,984,000 D. $ 2,112,000 $ 2,112,000 E. None of the answers is correct.

Explanation / Answer

Static budget 1984000 =640000+(84000*16) Flexible budget 2112000 =640000+(92000*16) Option B is correct

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