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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 SalsaProduction Cost BudgetApril 2011Production - Jars of salsa $25,000Ingredient cost (variable) $20,000Labor cost (variable) $12,000Rent (fixed) $5,000Depreciation (fixed) $6,000Other (fixed) $1,000Total $44,000Required:
Part 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.
Part b.1: Does the budget suggest that additional workers are needed? Suppose the wage rate is $20 per hour. How many additional labor hours are needed in May?Part : What would happen if management did not anticipate the need for additional labor in May?
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