Prepare a flexible budget for each of the possible production levels: 82,000, 93
ID: 2473400 • Letter: P
Question
Prepare a flexible budget for each of the possible production levels: 82,000, 93,000, and 104,000 units. (List variable costs before fixed costs.)
Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KHI’s expected costs at production levels of 82,000, 93,000, and 104,000 units.Variable costs Manufacturing $6 per unit Administrative $3 per unit Selling $2 per unit Fixed costs Manufacturing $140,000 Administrative $80,000
Explanation / Answer
SP=$16
then Contribution=$16-$11=$5
Desired profit=$323,500
Fixed cost=$220,000
so no of units to be sold=($323,500+$220,000)/$5=$543,500/$5=108,700 units
Flexible Budget Particulars Cost per unit$ 82,000 93,000 1,04,000 Variable cost Manufacturing 6 492,000 558,000 624,000 Administrative 3 246,000 279,000 312,000 Selling 2 164,000 186,000 208,000 902,000 1,023,000 1,144,000 Fixed cost Manufacturing 140,000 140,000 140,000 Administrative 80,000 80,000 80,000 220,000 220,000 220,000 Total cost 1,122,000 1,243,000 1,364,000