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1) CPA’s Hardware uses a flexible budget to develop planning information for its warehouse operations. For 20X5, the company anticipated that it would have 96,000 sales units for 664 customer shipments. Average storage bin usage for various inventories was estimated to be 200 per day. The costs and cost drivers were determined to be as follows:
Item Fixed Variable Cost driver
Product handling $10,000 $1.25 per 100 units
Storage 3.00 per storage bin
Utilities 1,000 1.50 per 100 units
Shipping clerks 1,000 1.00 per shipment
Supplies 0.50 per shipment
During the year, the warehouse processed 90,000 units for 600 customer shipments. The workers used 225 storage bins on average each day to sort, store, and process goods for shipment. The actual costs for 20X5 were:
Item Actual costs
Product handling $10,900
Shipping clerks 1,400
a. Prepare a static budget for 20X5 with static-budget variances.
b. Prepare a flexible budget for 20X5 with flexible-budget variances.
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