Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores.

The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $18,000 per year per forklift.

Novo employs 25 forklift operators who receive an average salary of $50,000 per year, including benefits. Each move requires the use of a crate.

The crates are used to store the parts and are emptied only when used in production. Crates are disposed of after one cycle (two moves), where a cycle is defined as a move from receiving to stores to production. Each crate costs $1.80. Fuel for a forklift costs $3.60 per gallon.

A gallon of gas is used every 20 moves. Forklifts can make three moves per hour and are available for 280 days per year, 24 hours per day (the remaining time is downtime for various reasons). Each operator works 40 hours per week and 50 weeks per year.

Prepare a flexible budget for the activity of moving materials, using the number of cycles as the activity driver. If required, round your answers to the nearest cent.

What is the activity capacity for moving materials? _________ cycles

If Novo works at 80% of activity capacity and incurs the following costs, what would the budget now look like:

Salaries 1,290,000

Leases 144,000

Crates 118,000

Fuel 24,000