Answer (C) is correct . The flexible budget provides for a cost of $1,000 per article ($10,000,000 ¡Â 10,000 articles). Each article should require 20 hours of labor (200 hours ¡Â 10 articles). Thus, the standard labor rate is $50 per hour ($1,000 ¡Â 20 hours), and total standard variable labor cost is $9,500,000 (9,500 articles ¡Á 20 hours ¡Á $50 per hour). Accordingly, total expected costs are $10,100,000 ($9,500,000 + $600,000 FC)
Answer (A) is incorrect because Variable labor costs only equal $9,500,000.
Answer (B) is incorrect because This is calculated by incorrectly adjusting the fixed costs downward for production.
Answer (D) is incorrect because Labor costs will decline as production declines, but fixed costs will not. This is incorrectly calculated by adding the standard labor costs for 10,000 articles to a reduced fixed cost calculated for 9,500 articles.
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Using a flexible budget, Zazoo’s total cost planned for the review and editing of 9,500 articles should be