Answer:
Option (B) is correct.
Explanation:
Direct labor = $155,000
Direct material = $165,000
Fixed factory overhead = $15,000
Total cost will be:
= Direct labor + Direct material + Fixed factory overhead
= 155,000 + 165,000 + 15,000
= $335,000 (for 9,000 hrs of production)
The cost of 1 hour of production is:
= Total cost ÷ Hours of production
= 335,000 ÷ 9,000
= $37.22
So in order to extend it to 10,000 we need 1,000 more hours of production :
= Hours needed × cost of 1 hour of production
= 1,000 × 37.22
= 37,220
Appropriate total budget for the department:
= Cost of adding 1000 hours + Total cost of 9,000 hours of production
= 37,220 + 335,000
= $370,556
