Preparing a Flexible Budget Using the following per-unit and total amounts, prep
ID: 2467728 • Letter: P
Question
Preparing a Flexible Budget Using the following per-unit and total amounts, prepare a flexible budget at the 14,000-, 15,000-, and 16,000-unit levels of production and sales for Natural Products Inc.:
Round per unit answers to the nearest cent.
Flexible Budget Units $ per Unit 14,000 15,000 16,000 Sales Less variable costs: Direct materials Direct labor Variable factory overhead Variable selling and administrative expense Total variable costs Contribution margin Less fixed costs: Fixed factory overhead Fixed selling and administrative expense Total fixed costs Operating incomeExplanation / Answer
Units $ per Unit 14,000 15,000 16,000 Sales (A) $75 $10,50,000 $11,25,000 $12,00,000 Less variable costs: Direct materials $24 $3,36,000 $3,60,000 $3,84,000 Direct labor $8 $1,05,000 $1,12,500 $1,20,000 Variable factory overhead $15 $2,10,000 $2,25,000 $2,40,000 Variable selling and administrative expense $12 $1,68,000 $1,80,000 $1,92,000 Total variable costs (B) $59 $8,19,000 $8,77,500 $9,36,000 Contribution margin (C) = (A-B) $17 $2,31,000 $2,47,500 $2,64,000 Less fixed costs: Fixed factory overhead $75,000 $75,000 $75,000 Fixed selling and administrative expense $80,000 $80,000 $80,000 Total fixed costs (D) $1,55,000 $1,55,000 $1,55,000 Operating income (E) = (C-D) $76,000 $92,500 $1,09,000