Managerial Accounting: P1-1 Santiago's Salsa is in the process of preparing a production cost budget
Problem 1-1. Budgets in Managerial Accounting 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 2011 Production 25,000 Jars of Salsa Ingredient cost (variable) 20,000 Labor cost (variable) 12,000 Rent (fixed) 5,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $44,000
Required: a. Using this information, prepare a budget for May. Assume that production will increase to 30,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign. b. Does the budget suggest that additional workers are needed? Suppose the wages rate is $20 per hour. How many additional labor hours are needed in May? What would happen if management did not anticipate the need for additional labor in May? c. Calculate the actual cost per unit in April and the budgeted cost per unit in May. Explain why the cost per unit is expected to decrease.