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Santiago’s Salsa is in the process of preparing a production cost budget for May

Author:
June 8th, 2024

Santiago’s Salsa is in the process of preparing a production cost budget for May. Actual costs in April were:Santiago’s SalsaProduction CostsApril 2017Production 25,000 Jars of SalsaIngredients Cost (variable) 20,000Labor cost (variable) 12,000Rent (fixed) 5,000Depreciation (fixed) 6,000Other (fixed) 1,000Total 44,000Using 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.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? What would happen if management did not anticipate the need for additional labor in May?Calculate the actual cost per unit in April and the budget cost per unit in May. Explain why the cost per unit is expected to decrease.

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